Energy bills finally start to fall

Households have started to see a cut in their energy bills after utility companies pass on lower gas prices.

The sliding wholesale cost of gas is starting to filter through to household bills. This week, Scottish Power and British Gas said they would lower their prices for customers not on fixed tariffs by 4.8% and 5% respectively. This follows a 3.5% price cut by Eon last week.

Consumer groups criticised the reductions as too little too late, noting that wholesale prices have fallen by 20% in the past 12 months.

What the commentators said

As to why prices are only now coming down, said Allister Heath in The Daily Telegraph, imagine if companies cut prices by 1p every few weeks, only to have to hike them by the same amount when wholesale conditions reverse.

Our retail energy prices would be chaotic and unpredictable. Better to lock in prices in advance, ensuring at least medium-term predictability for consumers.

Now that wholesale prices look set to stay low for some time, companies are becoming more confident about passing lower costs on. Note too that wholesale prices comprise only half of overall costs.

Transport and distribution is becoming dearer, while green taxes have also risen. "Energy firms' profit margins are pretty low, as their annoyed shareholders would be the first to point out."

Yet you can't help noticing, said Alex Brummer in the Daily Mail, that there's a "lack of symmetry" here. The six major energy firms tend to pass on rising world prices quickly, yet when they fall they drag their feet.

And ask them to reveal their buying or hedging strategies, added Osborne, "and they become awfully coy". What are they hiding? Hedging at the wrong price to lock in costs before a potential Miliband election win? No wonder Ofgem, the regulator, has "packed the companies off" to the Competition and Markets Authority.

Recommended

Beyond the Brexit talk, the British economy isn’t doing too badly
Economy

Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019
Spare us these desperate measures
UK Economy

Spare us these desperate measures

Struggling firms are trying to reinvent themselves. Some are going to have to get much more radical
21 Sep 2020
Universal Credit comes good
UK Economy

Universal Credit comes good

The government’s benefit reforms have been plagued with disasters since their introduction in 2013. The Covid-19 crisis, however, has revealed a posit…
21 Sep 2020
Bad data is driving fear of a second wave of Covid-19
UK Economy

Bad data is driving fear of a second wave of Covid-19

The recent spike in Covid-19 “cases” is very different to the original outbreak, says James Ferguson of MacroStrategy Partnership. The government need…
18 Sep 2020

Most Popular

Oil producers are back at their Covid-19 lows – is it time to buy?
Oil

Oil producers are back at their Covid-19 lows – is it time to buy?

With demand for oil hammered by Covid-19 and talk of “peak oil demand”, there are lots of good reasons to be bearish on oil producers. So, asks John S…
22 Sep 2020
Why you should stuff your end-of-pandemic portfolio with Chinese stocks
China stockmarkets

Why you should stuff your end-of-pandemic portfolio with Chinese stocks

For an end-of-pandemic portfolio, you need assets that can cope with today’s volatility. And that, says Merryn Somerset Webb, means Chinese stocks.
14 Sep 2020
IAG's share price is ready for take-off - here's how to play it
Trading

IAG's share price is ready for take-off - here's how to play it

The owner of British Airways has had a turbulent year, but is now worth a punt. Matthew Partridge explains the best way to play it.
8 Sep 2020