In 2008, the power industry saw a massive increase in energy prices, thus having to pass the costs on to their customers. Countless households suddenly had to implement significant changes in the way they were using energy around the home, while many others were simply unable to afford their energy bills.
However, the trend of higher energy costs recently took a downturn, after wholesale costs decreased for energy providers. Still, many providers kept their prices up, prompting consumers to ask whether their profits were justified. After a severe increase in prices the previous year - with a price peak in July - consumers wanted savings finally absorbed by the energy companies to be passed on to them.
So why did some energy companies reduce their energy process right away, while others kept them up? Is it simply a matter of profiting, even if from struggling customers?
The simple answer is no. The energy industry has experienced a massive blow with the rise of energy prices; but with a recent turnaround, the industry is keen to get both themselves and their customers back on their feet with regard to energy costs. However, there are a number of aspects to consider with regard to the cost of energy to consumers now. For instance, while wholesale prices have decreased - thus prompting some energy providers to cut their costs to customers - the fact remains that those wholesale prices are still double what they were two years ago.
The UK now purchases energy on a global level, with about 40 per cent of its gas being imported. And with an increase in demand for energy from countries like India and China, global energy prices on a wholesale level have been pushed up. For many energy companies, lowering their costs to customers depends not only on wholesale prices decreasing further, but also staying down.
However, the
energy debate still remains: with energy prices recently being reduced for companies, why are so many of these companies still failing to pass on more significant savings to their customers? After all, some companies have succeeded in decreasing their prices. One answer is that many companies are spending now to secure future supplies. In fact, some companies are currently spending more than they’re earning to build new power stations for this very purpose.
At the same time, while certain companies did reduce their prices sooner compared to others, the cuts were often a matter of timing versus cut figures. Because most companies are now buying energy on a global scale, energy costs to customers should fall into a common bracket. But while some companies are choosing to cut prices sooner - and in smaller amounts - others are choosing to do so later, in more significant chunks, so that costs ultimately do fall in line with one another. However, differences can be attributed to tariffs and services specific to each company.
So, can customers expect any significant price cuts in the near future? Ultimately it depends on an overall decrease in global wholesale energy prices. In the meantime, many energy companies are trying to help alleviate hardship for their customers with various means of support - including debt relief programmes and social tariffs, while encouraging people to conserve what they sell - a rarity within corporations.
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Andrew Regan writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.
