UK Energy Suppliers Told to Reduce Domestic Charges by Ofgem

It now seems that Britain’s energy suppliers have been told that they must cut their domestic prices for early next year. This warning came from the energy regulator Ofgem just hours after it had announced it was allowing the six big power companies to put up electricity prices to pay for network upgrades. After these statements, the chief executive of Ofgem, Alistair Buchana, said the big six power firms were enjoying strong margins following a slump in the price they pay for their energy on wholesale markets.

This statement came as the regulator said it would allow the power firms to increase electricity bills by £4.30 a year on average to pay for upgrades to regional distribution networks. The increase will be pushed through to customers each year between 2010 and 2015 and will free up £7.2 billion for investment in the UK’s electricity infrastructure.

Alistair Buchana said that their proposals are tough on inefficiency and poor service but are fair in allowing the companies to invest to replace aging network assets and in improving the environment. The £7.2 billion investment program, which is 8 percent less than what the companies asked to spend, also includes a £500 million fund for projects to tackle climate change. This was what Alistair Buchana said just before he went on to attack the power firms on wholesale price falling.

He said, at the moment, the effect of companies smoothing prices has been neutral on consumers. If prices stay unchanged in the new year, then consumers are going to start losing out. Thus, it sounds like companies are going to have to reduce their charges on consumers starting next year.