“British Gas’s costs have dropped by 9% so they should be cutting prices not raising them”

CEO of Centrica Iain Conn has hinted that he will be raising prices for 5 million British Gas customers once their price freeze ends in August. But new research shows that British Gas should be cutting bills not putting them up.

Analysis of energy regulator Ofgem’s Supply Cost Index by collective switching site the Big Deal shows that since a peak in December 2016 the costs for energy companies have fallen by 9% mainly due to a drop in wholesale prices.

British Gas first announced a price freeze in December 2016 and later said that they could freeze prices “despite increases in external costs [wholesale prices], because we have significantly reduced our own costs.”

Now that those external costs have dropped there is no reason for British Gas to raise prices. Instead, they should be passing those reduced costs on to the customer in lower, not higher bills.

Ed Molyneux, Head of Research for consumer collective the Big Deal, said:

“A British Gas price rise is completely unjustifiable. Their costs have actually gone down since they proudly declared their price freeze. They should be cutting prices not raising them.

“British Gas can’t, on one hand, say they can afford to freeze prices and then when their costs drop they decide to increase prices. There must be no British Gas price rise. It would unfairly hit millions of ordinary families in the pocket while British Gas makes millions in profit and their executives take home millions in pay packages.

“If the government acted to bring in the price cap it promised this behaviour would stop.

Ofgem Supplier Cost Index between December 2016 and January 2016

Month December 2016 January 2017 February 2017 March 2017 April 2017 May 2017 Cut in costs between December 2016 and May 2017
Supplier Cost Index for Dual Fuel 104.7 98.5 101.9 100.1 96.3 95.7 8.6%

Source: Ofgem Supplier Cost Index

British Gas makes half a billion in profit and CEO of Centrica earns £4.15 million

Notes for editors

Sources:

British Gas’s press release on their price freeze – https://www.britishgas.co.uk/media/r/1454/british_gas_extends_its_price_freeze

Centrica boss Iain Conn reported in the Sunday Times on 23rd July 2017:

  • “Next month there could be more pain, Conn hints. That’s when British Gas’s six-month pledge not to increase gas and electricity prices comes to an end. Costs have risen 15% over the past year for energy suppliers, he says, and “we are not immune from those”. “We are going to have to pay attention to all of that as we think about pricing,” he adds ominously.”

Ofgem Supplier Cost Index shows a 9% decrease in wholesale prices for a dual fuel customer between December 2016 and May 2017. https://www.ofgem.gov.uk/electricity/retail-market/retail-market-monitoring/understanding-trends-energy-prices#thumbchart-c8329010666635703-n106412

About the Big Deal

The Big Deal is a consumer collective focused on reducing people’s energy bills. We bring together tens of thousands of consumers and use our collective buying power to create exclusive deals.

Launched in March 2014, we now have over 350,000 members and continue to grow. 62% of our members have never or hardly ever switched before – these are the very people who have been let down by the energy market for too long. Moreover, 60% of our members are over the age of 55 and 30% over the age of 65. We have saved the British public over £15 million since we launched.

The Big Deal is a start-up business and charges a commission to energy companies. Unlike price comparison websites we are 100% transparent and publish the exact amount of our commission. For our most recent switch it was £50 for a dual fuel (both gas and electricity) switch. This compares to £60 to £100 for the main price comparison websites.


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