Ofgem boss joins price cut calls

Energy suppliers are overcharging customers and should cut their bills to reflect falling wholesale costs, according to the head of Ofgem.

Dermot Nolan, chief executive of the regulator, said: “We really should be seeing bigger retail cuts than we have seen so far.”

He was speaking on the BBC’s Today programme after a report by market analysts ICIS earlier this week revealed wholesale gas prices had fallen by 34 per cent in 2015 and electricity prices by 23 per cent.

Asked why consumers hadn’t seen their bills come down more, Mr Nolan said: “Because the market is not working as competitively as it should be.

“The best protection for customers in the long run is a fully-competitive market. I don’t think it is, which is why we referred the market to the Competition and Markets Authority (CMA), who are due to report in the very near future.”

When it was suggested to him energy suppliers were “ripping off” consumers, he responded: “I think they’re overcharging in many cases, yes.”

Mr Nolan said the best way for consumers to avoid being overcharged was trying to switch to a cheaper tariff. New figures show the number of people switching hit a record high in 2015.

Energy UK chief executive, Lawrence Slade, defended the industry, telling Today: “There are a number of different companies out there. We have got 34 different suppliers out there. There are a range of different tariffs to suit different people’s options.”

He added that falling wholesale costs didn’t tell the whole story: “Yes, they do represent a big chunk – around 45 per cent of the average dual-fuel bill is wholesale costs. What isn’t coming out is all of the costs that are added on to consumers’ bills that are outside of a supplier’s control.

“Some of those costs over the last year have actually increased, in one case by 20 per cent.

“When you look at that, and you look at a world where we are actually decreasing our consumption of gas and electricity due to energy efficiency measures, that reduces quite substantially the room that any supplier has to reduce bills at a time when wholesale prices are coming down.”