Lower energy bills but customers are still shortchanged, argues ROSS CLARK

If you have listened to the news casually over the past week you might think that Christmas has come late for energy consumers.

Last week E.On announced that it was reducing prices by 3.5 per cent, while yesterday British Gas announced bills would fall by 5 per cent.

But you don’t have to dig too deep to see that lower bills are no gift.

With oil and gas prices around the world plummeting it would be outrageous if domestic prices were not falling.

But a report by the EU’s energy committee reveals just how little benefit British consumers have seen from falling wholesale prices.

Energy prices in Britain, it reveals, are still in euro terms 13 per cent higher than they were three years ago.

Over the same period, consumers in the rest of the EU have seen prices fall by 0.5 per cent.

True, energy bills in Britain are still a little below the EU average, but then Britain is an oil and gas producer.

There is every reason why energy prices here should be lower here than in most European countries.

Visit the Gulf States and you could be in no doubt that energy is a local product.

Look at British energy bills, however, and you would never believe that we are still pumping large quantities of oil and gas out of the North Sea.

British consumers have been shortchanged both from falls in wholesale prices and a rising pound, both of which should have caused consumer prices to fall.

There is little hiding who has benefitted: the energy companies, which have steadily increased their profit margins over the past few years.

In 2014, according to Ofgem, British households paid an average dual fuel bill of £1,365.

That was a little bit more than the £1,312 (at 2014 prices) they paid in 2009.

And yet the slice of these bills accounted for by wholesale energy costs fell over the period, from £774 in 2009 to £636 in 2014.

Meanwhile, the slice which went into the energy companies’ pockets soared from £10 in 2009 to £77 in 2014.

When wholesale prices rise, the energy companies lose no time in jacking up our bills, but when wholesale prices falls they drag their feet and even then don’t pass on the full drop.

They are still at this trick.

British Gas’ price reductions won’t take effect until 27 February.

Consumers will be paying high prices for another six weeks of winter while British Gas itself enjoys lower wholesale prices.

It is very easy to say that domestic energy is a free market in Britain and that if you want cheaper energy you should stop moaning and switch your supplier.

But that ignores that many consumers are frightened of changing because of the sharp practice they have encountered when they done it in the past.

One customer, for example, was told by an SSE salesman that she could cut her bills from £1,600 a year to £1,423 if she switched to the company.

In fact, she ended up paying £134 a year more.

Hers was just one of many cases which came to light during an Ofgem inquiry which resulted in SSE being fined £10.5million for “numerous breaches of its obligations relating to telephone, in-store and doorstep sales activities”.

SSE had to stop doorstep-selling as a result of the Ofgem inquiry, but a £10.5million fine is a drop in the ocean for a company with a turnover of £30billion and profits last year of £611million.

The fines of £2million imposed on Npower and £2.5million on British Gas for failures in handling complaints are similarly of little consequence to those companies.

In many ways the damage is done, and all Big Six energy companies will be benefiting from it for years to come as people fail to shop around.

Moreover, energy companies are still confusing us with complex and constantly changing tariffs.

Just because an energy company is cheaper this week there is no guarantee that it won’t jack up its prices before the first bill arrives.

We have heard plenty of condemnation of energy companies from the politicians, to little effect.

Two years ago David Cameron made his infamous, off-the-cuff promise to force energy companies to make sure their customers are on the cheapest tariff – a promise which unwound within 24 hours.

Then in his 2013 conference speech Ed Miliband made his promise of a temporary freeze in energy prices if he won this year’s election.

It made him hugely popular at the time but it is looking a little silly now: who in their right mind wants their energy prices frozen when wholesale prices are in freefall?

Both main parties are far keener at barking at the energy companies than in taking any real action to stop the overcharging.

And of course no-one should forget that green energy policy is itself a big contributor to bills.

This year, subsidies to wind farms and other green levies are adding an average of £89 to energy bills.

By 2030, according to the government’s own Committee on Climate Change, that will rise to £175.

A huge part of the reason is the Climate Change Act 2008 which commits Britain to slashing carbon emissions by 80 per cent by 2050.

That target is the personal creation of Ed Miliband, the then climate change secretary who slipped it into the bill at the last moment with little regard as to the cost on consumers.

The Government and Big Six energy companies between them seem determined to turn Britain into a high-cost energy country.

As temperatures dip to minus 12 this week and consumers are still left waiting for price cuts, it is not an ambition which is going to win any them many friends.