The market price of UK gas and power has hit its lowest quarterly average in half a decade, with Q3 prices expected to remain under pressure as calls for retail price cuts mount.
Energy market specialists at Icis posted their Q2 power index results on Friday morning showing the average price at £44.72/MWh, its lowest since Q2 2010, while wholesale gas averaged 47.1 pence per therm, the lowest quarterly average since Q1 2010.
“The falling oil price and the currency impact from ‘Grexit’ fears are pushing down UK gas prices, and the effects are clear on the UK power price as well,” said Icis head of power Zoe Double.
The fresh data follows news last week that gas for delivery in winter 2015 hit its lowest level ever at 47.4 p/th, almost half the price paid for the Winter 15 contract when it was first traded in the wholesale market at around 81.45 pence per therm in 2011.
Market experts say the price of winter gas is now almost as low as it can go, but energy companies continue to charge customers the same rate for their retail gas tariffs.
“[W]hy on earth are hard-pressed consumers not seeing the full benefits of lower wholesale prices?” demanded Uswitch director of consumer policy Ann Robinson.
Energy UK chief executive Lawrence Slade defended energy suppliers, saying that “wholesale costs are only part of energy bills so cost reductions are never able to be exactly in line.”
Energy companies buy much of their energy from the wholesale market between 6 months to 2 years ahead of delivery to end-consumers, so current customer bills are based on market costs incurred before the heavy losses on global energy markets.
“Energy companies are bringing down prices across all their tariffs as fast as possible so customers should use any of the many switching sites to check they are on the right deal for them,” Slade added.
Energy suppliers are under strong political pressure to cut retail energy prices after energy secretary Amber Rudd spoke out soon after taking up the role last month to say the big six should pass on lower costs after the threat of a Labour government price cap was swept aside by the Conservative Party’s election victory.
Rudd’s calls come as wholesale energy prices have crashed over the past year following historic lows on the global oil market due to a glut of new production projects which have flooded the market. But losses have persisted on the UK gas market even after Brent crude prices have stabilised in recent months.
In addition, supply constraints are set to stem losses on the market in the coming quarter.
“The UK is holding less gas in storage than last year, and continental gas markets may need more supply from the UK, as Dutch domestic production has been capped and Ukraine is likely to purchase more from European traded markets,” a statement from Icis said.