Talk of energy price hikes premature
The large increase in operating profits posted today by British Gas' residential arm provides welcome proof that speculation about price rises is premature at best and unjustifiable at worst, says uSwitch.com, the independent price comparison and switching service.
While recent increases in wholesale prices have sparked talk of a price hike, the profits announced today by Britain's biggest supplier tell a different story - highlighting the ongoing benefit to suppliers of a long run of low wholesale prices:
British Gas Residential reports 98% increase in year-on-year profits - operating profits up from £295 million to £585 million
Some of the benefits of lower wholesale prices already passed on to customers - British Gas now offers the cheapest standard dual fuel prices after cutting its prices three times since the beginning of 2009, shaving 13% or £171 in total off its average dual fuel bill
Average household bill for a dual fuel British Gas customer has dropped from £1,202 to £1,157 this year - £245 or 27% higher than its average bill of £912 on the 1st January 2008.
Ann Robinson, Director of Consumer Policy at uSwitch.com, says: "This announcement is good news for consumers as it lays to rest speculation that household energy prices will be increasing soon. While there is a lack of transparency surrounding wholesale prices, there is no such ambiguity about large profits. And in this instance the 98% year-on-year increase in British Gas Residential's operating profits really does speak volumes.
"There has been some uncertainty, but while wholesale prices have gone up it is important to view this in context. Firstly, wholesale prices are still comparatively low compared with 2008 when household energy prices rocketed by 42% or £381. Secondly, we don't know whether we are looking at a short-term blip or an ongoing trend. The truth is that suppliers would need to see a consistent trend in substantially higher wholesale prices before they could justify a general price hike and, as these profits show, we are far from seeing that yet.
"In fact, rather than speculating about price hikes, today's profits suggest that suppliers could actually afford to pass on even more benefit to consumers by cutting their prices again. However, I would urge all consumers not to hang around - while suppliers have cut their prices by 8% or £99 in total over the last couple of years, these savings pale into insignificance compared with the fact that you can save around £300 a year by moving to a competitive online plan - the biggest and best chance of a price cut many of us can expect this year."