This article is from the source 'bbc' and was first published or seen on . It will not be checked again for changes.
You can find the current article at its original source at http://news.bbc.co.uk/go/rss/-/1/hi/business/8262360.stm
The article has changed 14 times. There is an RSS feed of changes available.
| Version 4 | Version 5 |
|---|---|
| Energy bills 'unlikely to fall' | Energy bills 'unlikely to fall' |
| (about 1 hour later) | |
| The big six energy suppliers have told the regulator Ofgem that there is little chance of any further cuts in their tariffs this coming year. | The big six energy suppliers have told the regulator Ofgem that there is little chance of any further cuts in their tariffs this coming year. |
| They were responding to a call from Ofgem last month to pass on more of the recent fall in wholesale energy costs. | |
| Ofgem's latest report says these lower costs will boost suppliers' gross profits, on each dual-fuel customer, by £60 this year. | Ofgem's latest report says these lower costs will boost suppliers' gross profits, on each dual-fuel customer, by £60 this year. |
| The firms say other costs which make up 40% of bills are rising steeply. | The firms say other costs which make up 40% of bills are rising steeply. |
| In August, Ofgem wrote to the chief executives of each of the big six energy firms, urging them to "respond" to falling wholesale prices as some poorer customers would be suffering hardship from high prices during the winter. | In August, Ofgem wrote to the chief executives of each of the big six energy firms, urging them to "respond" to falling wholesale prices as some poorer customers would be suffering hardship from high prices during the winter. |
| Depending on how good suppliers were at buying their energy in advance, the regulator says their wholesale electricity costs have fallen in the past six months by more than £7 per megawat hour, equivalent to £29 per customer's annual bill. | Depending on how good suppliers were at buying their energy in advance, the regulator says their wholesale electricity costs have fallen in the past six months by more than £7 per megawat hour, equivalent to £29 per customer's annual bill. |
| Meanwhile gas wholesale costs to the energy companies have dropped by an average of 10p per therm, or £59 for each customer's bill. | Meanwhile gas wholesale costs to the energy companies have dropped by an average of 10p per therm, or £59 for each customer's bill. |
| A spokesman for Ofgem stressed that the regulator was not ordering the suppliers to cut their prices, but merely to explain their pricing policies more clearly to their customers. | |
| Falling costs, higher profits | Falling costs, higher profits |
| The regulator's previous two quarterly reports on the relationship between wholesale and retail prices found that there was no evidence that suppliers had failed to drop prices when costs fell. | The regulator's previous two quarterly reports on the relationship between wholesale and retail prices found that there was no evidence that suppliers had failed to drop prices when costs fell. |
| If retail prices do not change, these lower cost will be reflected in higher gross margin Ofgem | If retail prices do not change, these lower cost will be reflected in higher gross margin Ofgem |
| However its third quarterly analysis suggests there is now scope for the firms to do so. | However its third quarterly analysis suggests there is now scope for the firms to do so. |
| Ofgem estimates that the gross profit of each of the big six firms for the next year will amount to an average of £170 per dual-fuel customer. | Ofgem estimates that the gross profit of each of the big six firms for the next year will amount to an average of £170 per dual-fuel customer. |
| That compares to an average gross profit of £110 over the past three years. | That compares to an average gross profit of £110 over the past three years. |
| Looking ahead by 12 months, Ofgem estimates that the wholesale cost of electricity will fall by around £25 per customer and that of gas by around £40. | Looking ahead by 12 months, Ofgem estimates that the wholesale cost of electricity will fall by around £25 per customer and that of gas by around £40. |
| "If retail prices do not change, these lower cost will be reflected in higher gross margin," Ofgem says. | "If retail prices do not change, these lower cost will be reflected in higher gross margin," Ofgem says. |
| No cuts likely | No cuts likely |
| The big six firms were united in rejecting the suggestion they should agree now to cut tariffs in the coming months. | The big six firms were united in rejecting the suggestion they should agree now to cut tariffs in the coming months. |
| Some even hinted that customers' tariffs might be higher in a year's time. | Some even hinted that customers' tariffs might be higher in a year's time. |
| • British Gas - "Prices [are] likely to remain at historically high levels, and in fact likely to increase as non-commodity costs rise ever upwards." | • British Gas - "Prices [are] likely to remain at historically high levels, and in fact likely to increase as non-commodity costs rise ever upwards." |
| • EDF Energy - "We would of course be prepared to reduce tariffs if market conditions allow." | • EDF Energy - "We would of course be prepared to reduce tariffs if market conditions allow." |
| • E.ON - "[We] do not believe there is a clear message regarding future wholesale costs movements that can be communicated to customers." | • E.ON - "[We] do not believe there is a clear message regarding future wholesale costs movements that can be communicated to customers." |
| • RWE - "A retail price commentary cannot be based only on a narrow view of wholesale costs and in any event wholesale costs need to be weighed against increases in other costs." | • RWE - "A retail price commentary cannot be based only on a narrow view of wholesale costs and in any event wholesale costs need to be weighed against increases in other costs." |
| • Scottish and Southern Energy - "With forward annual wholesale prices significantly higher, and with upward pressures in terms of distribution, environmental and social costs, seeking to avoid an increase between now and the end of 2010 is an important goal." | • Scottish and Southern Energy - "With forward annual wholesale prices significantly higher, and with upward pressures in terms of distribution, environmental and social costs, seeking to avoid an increase between now and the end of 2010 is an important goal." |
| • Scottish Power - "There are no immediate signals that would indicate a fall in retail prices for this winter, and risks of an increase next year." | • Scottish Power - "There are no immediate signals that would indicate a fall in retail prices for this winter, and risks of an increase next year." |
| Volatile costs | Volatile costs |
| The gross margin made by energy firms has to cover their every-day running costs, such as paying staff and selling their services, and so does not automatically translate into profits either for further investment or dividends for shareholders. | The gross margin made by energy firms has to cover their every-day running costs, such as paying staff and selling their services, and so does not automatically translate into profits either for further investment or dividends for shareholders. |
| Ofgem acknowledged that energy firms also have other important costs which push up domestic and industrial bills. | Ofgem acknowledged that energy firms also have other important costs which push up domestic and industrial bills. |
| Among them are the cost of subsidised "social tariffs" for poorer customers, and the cost of dealing with the bad debts of those customers who cannot pay their bills. | Among them are the cost of subsidised "social tariffs" for poorer customers, and the cost of dealing with the bad debts of those customers who cannot pay their bills. |
| The bills that customers do eventually pay are also heavily boosted by the cost of paying for the transportation and distribution of gas and electricity around the national networks, and the cost of meeting the government's environmental obligations. | The bills that customers do eventually pay are also heavily boosted by the cost of paying for the transportation and distribution of gas and electricity around the national networks, and the cost of meeting the government's environmental obligations. |
| These cannot be controlled by the energy suppliers and are passed straight on to the consumer. | These cannot be controlled by the energy suppliers and are passed straight on to the consumer. |
| Overall, these extra costs now make up £360 of the average annual dual-fuel bill, compared to the £597 wholesale cost of the fuel itself. | Overall, these extra costs now make up £360 of the average annual dual-fuel bill, compared to the £597 wholesale cost of the fuel itself. |
| Ofgem also noted that firms may start to face higher wholesale energy costs in the spring of next year. | Ofgem also noted that firms may start to face higher wholesale energy costs in the spring of next year. |
| The firms argue that there will always be a lag between wholesale price movements and customer tariffs. | The firms argue that there will always be a lag between wholesale price movements and customer tariffs. |
| "Prices are very volatile," said Andrew Horstead of energy consultants Utilyx. | "Prices are very volatile," said Andrew Horstead of energy consultants Utilyx. |
| "If they were fed through immediately consumer bills would naturally be very volatile," he added. | "If they were fed through immediately consumer bills would naturally be very volatile," he added. |