No one seems to have told the men who dominate Britain’s energy business that when someone writes you a letter it is good manners to reply. When that person is the secretary of state for energy it is not just good manners, but good sense. Both virtues have abandoned four of the six chief executives of the country’s biggest energy companies. Asked by Amber Rudd in May to explain how they would pass on falling wholesale gas and electricity prices to their customers, these four — representing E.ON, British Gas, npower and EDF Energy — have not bothered to write back.
Consumers are left to wonder how these companies can justify static or rising energy prices when wholesale prices have fallen by a fifth. They are left to wonder whether the energy sector will react voluntarily to a damning report this summer accusing its leaders of overcharging households by £1.2 billion a year, or whether it should be forced to. More broadly, they are left to wonder at the sheer arrogance of an industry in which lip-service but not real attention is paid to customers, and ministers are regarded as a minor irritant whose official correspondence can simply be ignored.
Since Ms Rudd’s letter was sent to the “big six” only one of them has made a significant price cut. British Gas lowered its average gas tariff by 5 per cent in a period when the price it pays its wholesalers has fallen four times as far. The other five major energy retailers have pocketed the difference, made excuses about the vagaries of the market and the costs of distribution, or both.
In the past year some of the companies have lost market share to cheaper suppliers but with little apparent impact on their bottom line. In May, SSE, formerly Scottish and Southern Energy, reported a 40 per cent rise in profits despite losing 500,000 customers. Against this background the Competition and Markets Authority reported in July that the British energy market was not competitive. It said that the big six had overcharged households by £6 billion over five years, and small businesses by nearly half as much. It advised the government to impose a temporary 5 per cent cut on “standard” energy tariffs that would have benefitted 20 million households.
The competition authority’s report was political in origin. It was commissioned by the coalition government in response to Ed Miliband’s popular proposal as Labour leader for an energy price freeze. David Cameron promised before the election to implement the report’s recommendations, but has quietly dropped that pledge since being returned to power with a surprise majority.
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The election saved the big energy companies from price-fixing by either party. But it also deprived them of their main excuse for keeping prices high, namely to protect themselves against the risk of steep mandatory price cuts under a Labour government. The point of Ms Rudd’s letter was to ask how they intended to pass their savings on to customers now that this risk had vanished along with Mr Miliband.
The failure of every big energy company apart from Scottish Power and SSE to respond to a serious ministerial inquiry is unacceptable. They operate in a tightly regulated market, but also with what is, in effect, a captive client base. It is true that customers should shop around more than they do, but the big six make it harder than it should be. They should cut prices as real competition dictates, and they should learn some manners.