Wholesale energy prices have fallen to record lows this year but suppliers aren’t passing those savings onto consumers.
Depressed demand due to coronavirus restrictions and an ongoing oil price war between Russia and Saudi Arabia have pushed energy prices down across 2020. Gas prices, which had already fallen by half by the end of 2019, slipped to a 10-year low in March. Because gas is used to generate around one-third of the UK’s electricity, those cratering prices have a knock-on effect on overall fuel costs. According to market regulator Ofgem, wholesale energy prices are 46% lower today than they were a year ago.
Those wholesale prices account for 38% of a typical dual fuel energy bill, so a drop in prices of that magnitude should result in a 17.5% reduction in bills for customers on standard variable tariffs if suppliers were passing on all of those savings.
That would mean a savings of £16 a month on the average energy bill, or £200 a year if wholesale prices remain low, according to automated switching service Switchcraft.
But the average cost of a standard variable tariff with one of the Big Six is actually up 3% this year.
Only challenger brand Igloo has slashed rates, trimming gas bills by 30% in March, to save its 92,000 customers an average of £320 a year.
Renewable supplier Bulb, which serves 1.6 million customers, hasn’t adjusted their prices since March, when it cut gas rates but hiked electricity prices, leaving customers just £56 a year better off.
Amit Gudka, co-founder of Bulb, said the supplier wasn’t planning on any adjustments to its prices in the near future.
“Wholesale gas and electricity prices are expected to remain low for the summer but could rise again before the end of the year. The coronavirus crisis has made the wholesale market much harder to predict in the long term. In light of this uncertainty and an expected rise in network costs, we're not planning a change to our pricing,” he said.
However, savvy customers can find savings by shopping around. The cheapest fixed energy tariffs have dropped 12% in price this year. Switching to one of these can save you up to £250 a year on your energy bills.
Suppliers might be forced to pass on savings if Ofgem adjusts downward the energy price cap for standard variable tariffs. An announcement of the new level of the cap, to come into force 1 October, is expected later in the summer.
The supplier has become the latest victim of the energy...
Vodafone is offering mobile customers a month of unlimited data,...
1.3 million broadband and mobile customers have been prompted to...
Centrica is scrapping its digital-facing, low-cost brand British Gas Evolve...