Energy secretary Grant Shapps has urged power firms to lower bills, passing on savings to households made from falling wholesale costs.
“No ifs, buts or maybes,” he told energy suppliers in a speech at Chatham House, pressuring them to reduce bills which are expected to rise from April 1, regardless of regulator Ofgem’s lower price cap.
Ofgem’s cap reflects how much suppliers can charge customers based on wholesale energy and a raft of other costs, with the £3,280 April figure representing what an ‘average household’ using electricity and gas would pay over a year.
Wholesale gas prices have dropped 65% since the current cap level was introduced in December, but Ofgem’s new figure has dropped less drastically by 23%.
Interactive investor analyst Myron Jobson described this as an “excruciating lag,” since many companies buy energy off wholesale markets in advance so are bound to higher rates, but most suppliers have huge trading arms so the picture might not be that simple.
British Gas owner Centrica PLC (LSE:CNA), for example, employs over 600 people in its trading arm, which buys and sells energy to later be sold to households, dealing on 24 markets across Europe, according to its website.
Government support is also due to be cut on April 1, which will raise its cap on household energy bills to £3,000, rather than today’s £2,500, costs could rise by a fifth irrespective of the fact wholesale prices are down, leading to calls for the rise to be scrapped.
Suppliers, such as British Gas, SSE PLC (LSE:SSE), ScottishPower, E.ON and Octopus Energy, are being urged to pass on savings to customers by the government, therefore, after the former reported tripled operating profits in 2022.
“The falling wholesale price of energy offers an opportunity for the government to consider more help,” said Sarah Coles, personal finance head at Hargreaves Lansdown.
“In January around 9,500 people approached Citizens Advice for help with fuel debts – a number that has doubled in three years,” and is now the “most common form of debt problem,” she added.
Trade Union Congress boss Paul Nowak said the government should “cancel its imminent hike in household energy bills” in the March 15 Spring Budget.
Shapps is expected to push his "one overriding mission" of boosting domestic sources of energy on Wednesday.