The consumer group Energywatch renewed a call for an inquiry into household gas prices last night after it was revealed that although wholesale gas prices have fallen by 40% since March, consumers have suffered rises of 30% in the past six months.

The figures were produced by the price comparison service TheEnergyShop.com, which says the fuel inflation figure will be pushed even higher after January 1 when the 7.5 million customers of Scottish and Southern Energy will have to pay an extra 12.2% for their gas.

The high cost of energy has prompted calls for the chancellor, Gordon Brown, to widen the group eligible for winter fuel payments. In a letter to the Guardian today, a range of pressure groups including the Child Poverty Action Group, Save the Children, the Disability Alliance and the National Consumer Council call for extra payments to help households out of fuel poverty.
Joe Malinowski, of the TheEnergyShop.com, said wholesale gas prices had been "dropping like a stone" and there was "little justification for the latest round of price rises". An Energywatch spokeswoman said: "We believe there should be a competition commission investigation into whether the market really is working. If prices fail to come down, it will only add to the suspicion that consumers are not being given a fair deal."

Since January 2004, average household energy bills have risen by 69%, or £407. The average joint bill for gas and electricity now stands at around £1,000 a year a household. All power companies have raised prices at least twice in the past 12 months. Each time the wholesale gas market has been blamed.

Mr Malinowski said there was doubt over the validity of these claims: "If you look at the chart there is a big gap between retail and wholesale prices. The [wholesale] price has been dropping, helped by a mild winter and much improved supplies. The forward curve for the price for delivery over the next couple of years is close to 1.5p/kWh.

"After the Scottish and Southern rise in January, the average paid by consumers will be double that. Even after transport and other costs of 0.7p/kWh, that leaves profit margins of around 26%, which most people in this business would describe as outrageous."

A spokesman for the Energy Retail Association, which represents each of the UK's big six power suppliers, said UK consumers paid less for energy than all other European countries. "Wholesale prices have come down recently, prompted by the very mild start to the winter and increased supply from Europe. However, over the last three years the price paid for gas rose by 170% while the price paid by consumers has only risen by 100%. Suppliers continue to be hit by substantially higher costs; we need to see a sustained period of calm before prices will fall again."

The regulator Ofgem last held a major investigation into the competitiveness of the gas market in 2004. A spokesman said the market was working and was being monitored "on a daily basis".

In recent weeks the energy companies have reported big rises in profits. Scottish & Southern Energy has announced a 35% increase over the last six months to £455m. Its rival Scottish Power posted a 77% increase in half-year profits to £483m. Scottish Power maintains that profits from its retail business have fallen and that gains were down to generating operations.

A spokeswoman for Scottish & Southern Energy said: "It's unfair to take a snapshot [of the wholesale gas market] at any particular month." She conceded that the case for future consumer price cuts was growing. "In 2007, if we continue to see lower wholesale prices, we will be able to look at the situation again."

Sources: http://www.business.guardian.co.uk

Find out if you can save money on your Household Energy prices.

For savings on your Business Energy see our Business Electricity and Business Gas pages.

Go Back to Utilities News >>