Leader: Big six should seize chance of a fresh start

The UK energy industry is running out of excuses. Or so say the consumer groups, who this week have been emboldened by the calls from new energy secretary Amber Rudd for retail energy price cuts. Rudd has wasted no time in sparking renewed pressure on the big six to pass through lower costs to consumers now that the profit-risk posed by a Labour government and its price freeze pledge has been thoroughly dashed.

While Labour was seen as a threat to big business, one might have thought that the certainty and consistency offered by a Tory majority would feel like a relatively safe space to pass on the double-digit losses seen in the UK energy markets this year. But the big six are sticking to their tariff rates.

Energy companies have been clear in the past that their prices are dictated by a complex web of costs – including wholesale energy trading, policy obligations and political risk.

But recent years have seen a roll-back of Energy Company Obligation (Eco) costs and historic lows across global energy commodity markets. And now there is an ebb in the tide of political risk too – partly due to Labour’s defeat but also because early indications show the Competition and Markets Authority (CMA) is unlikely to force a structural overhaul of the big six. It’s small wonder that Rudd has had enough. One by one it seems the defences of the big energy companies are being knocked down.

So why have firms done nothing to offer consumers more than the lacklustre sub-5 per cent gas price cuts seen earlier this year?

There doesn’t seem to be a clear answer. Npower boss Paul Massara was outspoken about his company’s inability to act while Labour threatened to intervene. But his media team at the time of going to press said there were no plans to cut prices now that the threat has been removed – although they did not offer any justification for this. It’s doubtful any of Npower’s rivals would say different.

As smaller independent suppliers continue to gain market share and the CMA’s watchful eye on competition remains, it beggars belief that energy companies are so slow to react – either to slash prices, or to justify why they can’t.

The new government should be seized by the sector as a fresh start to re-establish a dialogue that is clear, open and honest. Rudd has started the conversation, and if the energy companies would like to avoid another five years of combative political pressure, the time to speak up is now.