Why aren’t firms passing on the fall in energy costs?

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Also while firms here announced a sequence of energy price hikes last year, they didn’t pass on the full extent of the wholesale price rises. Take the price of natural gas, it used to trade on wholesale markets at roughly 50-60p a therm before Covid and before Russia’s invasion of Ukraine. At the height of the energy crisis last year, it traded at 10-12 times this level. It reached a peak of nearly 800p a therm late last summer.

While energy prices for consumers have risen substantially, no one’s bill has risen by this sort of multiple. So you could say suppliers shielded households from the full extent of the wholesale price hike. In some cases firms used the additional revenue from electricity generation to subsidise their retail units.

Also while prices are falling and have returned to pre-war levels, they are still elevated. Natural gas is still about 130p per therm, more than twice the pre-Covid level. This is because prices were at record highs to begin with . If the war component of higher energy prices has gone, for the moment, the Covid surge is still with us.

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