If a news story is good, why stop running it? That seemed to be the approach taken at opposite ends of the UK national newspaper spectrum over the past week.
First, left-leaning, right-on Guardian readers were treated to news that the big six still have not reduced bills despite a summer of historic lows on the wholesale markets. The howls for price cuts were echoed just days later by the Daily Mail outrage-mongers.
Surely it’s not too complex to grasp that energy firms buy their gas and power from the wholesale market years in advance? This means that today’s lightbulb is mostly powered based on market conditions at the beginning of last year: when the UK’s domestic gas storage levels were empty, triggering a summer of aggressive demand (and prices to match) in order to replenish them.
But on top of this it turns out that gas is more expensive than it looks. Energy companies are required to publish their weighted average cost of gas (Wacog) in their segmental accounts each year, which sheds light on this. Early this year, for example, British Gas reported its Wacog for domestic customer supply in 2013 was more than 13 per cent higher than the prevailing prompt market rate at an eye-watering 75.60p/therm. Why? Well, the cost of gas isn’t just the wholesale price. It includes costs relating to grid balancing, hedging and seasonality.
Of course the nationals aren’t keen on the truth getting in the way of a front-page splash. But isn’t it time for the big six to make their case? Until they do, they can’t complain about the inevitable future bad press days.