Cut prices or risk proving the CMA right, warns Nolan

Ofgem chief executive Dermot Nolan has hit out at energy suppliers over their failure to pass on historic lows in the price of gas at the same time that the sector is undergoing an extensive competition probe.

In an exclusive column for Utility Week Nolan said that companies have failed the 70 per cent of customers still on standard variable tariffs by keeping prices high, at the same time that the Competition and Market Authority (CMA) is investigating concerns that these same tariffs exploit a lack of consumer engagement in the market.

“Wholesale gas prices for this winter are their lowest for six years. This has resulted in better deals for many consumers on fixed tariffs. But for the 70 per cent or so who remain on standard variable tariffs, prices have fallen very little this year,” he said.

When calls for price cuts first emerged last year when global commodity prices fell energy suppliers argued that hedging positions can take six to 12 months to unwind to allow lower costs for the company. And earlier this year companies were said to be unable to offer lower costs due to the political risk posed by Labour’s pre-election price freeze pledge.

But after almost 18 months since gas prices first began to slide, and almost six months since Labour was defeated in the general election prices are largely unchanged.

“This issue was at the heart of the CMA’s provisional findings in July. Since then – and even as wholesale gas prices continue to fall – most suppliers have failed to respond by cutting standard variable tariffs.

“Maybe suppliers are trying to prove the CMA right,” Nolan said.