Angus MP Mike Weir has backed calls for the energy regulator to be given greater powers to enable them to force reductions in energy prices when wholesale prices fall and these falls are not passed on to consumers.
Speaking in a debate in the House of Commons, Mr Weir said that something was clearly wrong with the way the energy market was working, and that the current efforts were not reducing prices for the majority of consumers. Ofgem have recommended an investigation of the market by the Competition and Markets Authority.
“The average duel fuel price increased by over 24 per cent between 2009 and 2013, at the same time the profits of the big six energy companies increased by around £700million and now stand at £3.7billion.
“Within these figures non domestic supply profits have fallen slightly, while domestic supply profits have increased from £233m to £1,190m, a staggering rise over a four-year period.
“Clearly the hard-pressed consumer is bearing the brunt of massive price rises at a time when wages were, at best, static and other essential costs such as foods were also rising sharply”
Mr Weir also questioned the argument put forward by the energy companies that they could not immediately reduce prices due to the fact they operated a hedging strategy in forward buying energy.
“The object of a hedging strategy is to prevent spikes and troughs in prices. If companies were truly operating such a strategy, we should also not see substantial rises when wholesale prices rise, yet we do. If they are operating such a strategy, it is clearly not working.
“Governments have consistently argued that switching is the way for people to save money. The truth is that those who would benefit most from switching are those who find it very difficult, if not impossible, to switch. Those who are most active in switching are those who are already on better deals.”
“It is also true that the differences between the best online deals of the major companies tend not to be great and the benefits of repeated switching are subject to the law of diminishing returns.”
Mr Weir supported the referral of the market to the CMA, but called for it to be dealt with quickly.