Gas and electricity Updated:
Households have long been feeling the pressure from their gas and electricity bills. Prices only ever seem to be increasing, and those coming to the end of fixed rate deals could find their payments quickly jump up. It's even more frustrating when you realise that gas customers are being charged three times more than the suppliers themselves pay – the price of wholesale gas has halved in six months, so why aren't bills going down?
It's a question that's been repeatedly put to the industry over the last few days. Official figures show that wholesale prices are now at their lowest for four years, at less than 42p a therm (a unit of heat energy), down from 72p a therm in December. Yet some companies are charging customers up to £1.50.
This has understandably led a lot of people to think they're being ripped off by their energy supplier, particularly given that wholesale costs have dramatically fallen yet bills only seem to be going up. The companies argue that wholesale prices are only part of their costs, hence the reason they charge customers so much more, but this isn't sitting well with a lot of consumers.
Ofgem, the industry regulator, has broken the costs down to outline what it actually is we're paying for. According to their calculations, the average dual fuel bill from August 2014 to August 2015 will be £1,330. The portion of the bill made up by suppliers' wholesale costs is £598, while network, environmental and social costs account for £386 of it. Supplier operating costs for the next 12 months are expected to make up £174 of the bill, which all equates to a potential pre-tax margin of £102 (or 8%) over the same period, per bill, for a typical supplier.
It's a pretty tidy sum, and although all businesses have to make a profit, the amount energy companies are making won't sit well with a lot of consumers – it's been reported that British Gas's parent company, Centrica, for example, made pre-tax profits of £900 million in the first six months of the financial year.
It's hoped that the Competition and Markets Authority (CMA) investigation currently taking place will address some of the inherent issues in the market and, eventually, will lead to cheaper bills. But, in the meantime, it's vital to make sure you're getting the best deal possible.
It's often the bigger companies that charge the most for the basic cost of gas, so it could be time to consider the alternatives. Smaller, independent companies invariably offer the lowest prices – several have tariffs that cost less than £1,000 per year – so if you think you're being ripped off by your current supplier it's well worth doing your research. Use our comparison tool to see how much you could save!
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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