In a healthy, competitive market, prices go down when costs go down. Not in the energy market. As Ofgem announced this week, the wholesale cost of gas and electricity has dropped by more than a third since this time last year, but our bills have increased. Wholesale power is the cheapest it’s been since 2010, so why haven’t the savings been passed onto consumers?
The energy industry usually blames price rises on increasing wholesale costs, so the announcement those costs are going down is tricky for them. This week Energy UK, the Big Six trade body, said: ‘Wholesale energy is just one of a number of costs outside of an energy company’s control, which make up a household bill’.
This would be easier to swallow if we hadn’t seen the profits that the Big Six energy companies make from supplying energy to you and me double in a year. The margins for supplying gas have rocketed from 5 per cent last year to 10 per cent this year, and the profits made from supplying dual fuel households more than doubled from 3 per cent to 7 per cent. So the question is, why has the drop in wholesale costs turned into big profits for big business, rather than savings for consumers?
The answer, in part, is a lack of competition. Six companies control over 90 per cent of household gas and electricity supply and over 60 per cent of people have never switched their energy supplier.
To answer this objection once and for all, Ofgem has proposed that the energy industry be referred to the Competition and Markets Authority for investigation. But such an investigation will take years to report and even longer for anything to actually happen. After years of prices rises, people need lower bills now.
Our Spectator Energy proposal, in association with campaigning organisation The Big Deal, is simple: we get the market to work for you. We bring together thousands of people – over 10,000 so far – to negotiate a better deal on their behalf. There’s power in numbers, and by harnessing the collective buying power of thousands of consumers, we can inject competition into a market dominated by big players.
The aim is to deliver a better tariff than you could find anywhere else on the market saving you hundreds of pounds – but legally, we’ll only be able to offer it to our members. So do sign up before the end of the day to get in on the first offer. This is a chance not only for you to save some money, but to help fix a broken market.
Join our 10,000 members by signing up at new.spectator.co.uk/thebigdeal or calling 0333 222 5872. It’s free to sign up, takes 60 seconds and is completely obligation free. This commits you to nothing – if our partners, The Big Deal, fail to negotiate a good enough price you can stick with your original supplier. But if you’d like a quote, do sign up.