Energy Bills: UK Gas Prices Hit Record Low

UK wholesale gas prices have hit a record low for November and December delivery, piling more pressure on energy firms to cut household bills.

The latest fall in raw costs was a response to Ukraine and Russia signing a deal, which will see Moscow resume supplies of gas over the winter despite their continuing sovereignty row.

The agreement also guarantees delivery to the EU.

Russian gas makes up approximately 15% of UK supply.

Raw energy costs, including oil, have been tumbling in recent months – with Brent Crude losing 25% of its value since June on the back of weaker demand as the world’s economic recovery shows signs of easing.

Wholesale gas prices have dropped 23% over the past year though household bills have remained largely static.

The energy regulator Ofgem told Sky News this week it was seeking an explanation from firms about why they had not passed on to customers the significant falls in wholesale costs.

So-called ‘Big Six’ firms responded to today’s development by insisting that bills reflected long term gas costs. 

Companies have recently been tinkering with their offerings, taking their lowest annual tariffs below an average £1,000, but are yet to signal any major cuts to bills.

Energy firms have to buy gas and electricity so it can be supplied to households.

This is carried out up to 18-months in advance on either the wholesale market or under a contract with an electricity generator.

Some suppliers are also part of companies that generate their own energy, so they effectively sell energy to themselves – a situation that has led to calls for greater transparency on profits by splitting generation and supply businesses.

Reported profit levels have recently fallen back to levels not seen since 2009 and companies have consistently argued that their profits are fair and bills reflect not only the timing of their raw gas purchases and hedging strategies but also and high investment costs.

National Grid’s latest Winter Outlook report warned that spare capacity was at its weakest level for seven years  - a result of several factors including the failure to keep pace with power station closures and unscheduled plant outages.

Energy Bills: UK Gas Prices Hit Record Low