UK gas bills up despite supplier costs trending down

UK retail gas customers are still receiving record high bills despite wholesale gas prices dropping by 60 per cent since mid 2008.

Research from Britain's number one comparison site shows customers are still paying average gas bills of nearly £800 even though the price of wholesale gas fell by 60 per cent from mid 2008 to the end of 2009. Gas suppliers have only passed on small reductions to the cost of standard gas bills over the same period, which means bills are still at a 10 year high.

If gas bills had fallen in line with the wholesale price, customers would have seen a £478 saving - from £797 to £319.

Scott Byrom, utilities manager at moneysupermarket.com said: "Consumers will be shocked to see such a massive fall in wholesale gas prices compared with the tiny price drops they may have seen in their gas bills over the same period, Many may actually have seen gas prices rise last year.  Energy companies will argue that domestic gas prices are decoupled from the wholesale price - this seems to be true when wholesale prices are falling but not when they are rising!"

Scott Byrom continued: "We are in the midst of results season for the energy giants and many are reporting large profits - no wonder as Ofgem's report last week showed supplier margins are at a six year high, as well as pointing out that as well as falling gas wholesale prices the cost base of suppliers is falling too.

"Credit then to British Gas which is the only provider to drop its gas prices this year - passing on savings of seven per cent. This is a positive move by British Gas but no other providers have followed suit yet leaving their customers asking 'when will my gas bill come down?'

Scott Byrom concluded: "It is understandable that customers are feeling out of pocket.  The providers say there are additional costs, on top of the price they pay for wholesale gas, which also needs to be taken into account, such as investment in renewable energy sources. This further highlights the need for more transparency and clarification within the industry and more communication between providers and their customers on why there is such a wide gap and how the money is spent.

"Competition in the energy market has focused on providers launching new, cheaper tariffs, for new customers and no providers have made substantial price cuts for existing customers.  Competition is especially fierce for "online pay monthly" tariffs which are now £300 cheaper for gas alone than the Standard quarterly tariffs that the majority of customers are still paying.  Whilst for many customers switching to a new provider is the best option at the very least customers should contact their current provider and ask to move to its cheapest tariff."