Ofgem asks Big Six to explain pricing

Big Six Energy firms

This article was last updated on April 16, 2022

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Big Six Energy firmsThe energy regulator Ofgem has urged the Big Six energy suppliers to explain the impact of falling whole prices on the bills to their customers, after the cost of both gas and electricity has fallen “significantly” in recent months.

In a letter to the large suppliers, the regulator has defined that failure to respond to the continually falling wholesale costs risks undermining public confidence and trust in the energy market.

In early June 2014, gas prices for next day delivery reached their lowest level since September 2010 and are now around 38% below this time last year. The similar trend has been observed in electricity too, with prices reaching their lowest level since April 2010 at the start of June. They are currently around 23% lower than this time previous year.

While there are upward pressures on energy costs resulting from government schemes to support environmental objectives as well as energy network renewal, the costs of wholesale power and gas cost dwarf these and make up just less than half the total household bill.

Ofgem has also indicated that “as far as we know”, the large energy suppliers had not explained the recent price drops to customers.

Ofgem Chief Executive, Dermot Nolan has said: “The Big Six suppliers tell us that they think the market is competitive, but our research shows that consumer trust is low. Therefore if suppliers are going to start rebuilding that relationship they need to take the initiative and explain clearly what impact falling wholesale energy costs will have on their pricing policies.”

However, the energy firms have responded to the call by saying that it is much more complicated than what the regulator is quoting, are overnight prices.

To tackle the situation, the regulator has proposed that the Big Six energy firms should be investigated by the Competition and Markets Authority for not passing the savings to the customers.

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