New research by Consumer Focus shows that energy customers are being overcharged by a combined £1.66 billion this year (£74 per household), as declining wholesale costs have not been fully passed on by suppliers.

Analysis shows that current gas prices should be at least 7.4% cheaper, and electricity bills a minimum of 3.1% lower, if suppliers had fully passed on declining wholesale costs to consumers. The watchdog is calling on suppliers to pass on these savings immediately.

The research also suggests that additional price cuts of up to 8% (£65) for gas and 4% (£17.80) for electricity should be made by the end of the year, if market conditions do not substantially change. This, combined with an immediate cut, would save £157 on current prices by winter, which would make a huge difference to many cash-strapped consumers.


As part of its analysis Consumer Focus applied the five hedging strategies outlined by Ofgem in its probe report last year, to reflect the wholesale price paid by suppliers for their gas and electricity. These estimates on electricity and gas costs are regarded within the energy industry as conservative and the actual gap between wholesale and retail prices could be even higher.

Philip Cullum, Deputy Chief Executive of Consumer Focus, said: "Consumers have feared for months that the big six suppliers might not have passed on the full cuts in wholesale energy prices, but the companies claimed to have acted fairly. Our new research for the first time shows the reality. The companies are pocketing £1.6 billion extra, while millions of households struggle to make ends meet.

"Energy firms should take immediate action to put things right for their customers. A failure to act, and to ensure that people pay a fair price for energy, could have serious consequences for the sector."

(CD/JM)