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UK energy customers ‘overcharged’?

25 Jun 2009 | Filed under: Energy

According to today’s BBC report, customers are being overcharged on their annual energy bills, an independent consumer watchdog has said.

Consumer Focus says energy suppliers have not been fully passing on declines in wholesale costs. Crude oil has fallen from $147 a barrel in July last year to about $70.

But the Energy Retail Association says that other costs have gone up and there is no evidence of suppliers increasing prices faster than they reduce them. Consumer Focus says its research, based on applying hedging strategies outlined by the energy regulator Ofgem, shows that energy suppliers are overcharging customers by a combined £1.66bn this year.

But Ofgem, which concluded an investigation into the energy market last year, said it was “entirely confident” in its analysis of wholesale and retail energy prices.

“We cannot accept Consumer Focus’ claim to have used our methodology for calculating wholesale costs. They have borrowed some of it but they appear to have made assumptions that are simply wrong,” the regulator said.

British Gas cut its gas prices by 10% in February and its electricity prices by 10% in May. E.On, EDF Energy, Scottish and Southern, Scottish Power and Npower all lowered their electricity prices by the end of March.

Energy companies argue that bills are not based on wholesale costs alone.

“The amount of gas and electricity a customer uses can form as little as half their annual bill,” said Garry Felgate from the Energy Retail Association. “The remainder includes other costs, such as transporting gas and power around the country and meeting the government’s carbon emissions reductions targets. All these costs have risen sharply in recent years. Consumer Focus has ignored these facts during its research.”