What happens if prices fall, says Energy Advice Line?

The Energy Advice Line has challenged Labour’s pledge to freeze energy prices if it wins the next election, arguing consumers could end up short-changed if wholesale energy prices fall.

Julian Morgan, managing director of the price comparison, switching and advice service for domestic and business energy users, said some analysts were predicting wholesale energy prices were due to fall.

Mr Morgan said Labour leader Ed Milliband had not addressed the issue of what would happen to consumer energy bills if this happened during his proposed 20-month price freeze.

Energy provider SSE faced the same problem after pipping Labour to the post last month and pledging a price freeze until 2016.

“We have said before that Labour’s price freeze pledge is a gimmick designed to win votes, and one that has not been thought through,” Mr Morgan said.

“Mr Milliband could well find himself in trouble if he freezes energy prices at a time when they are going down.

But what happens to the savings on a frozen contract when wholesale prices g down?

“Some analysts argue that to guarantee a price freeze until 2016, SSE must have been hedging power contracts for some time, in other words, buying energy ahead of time to guarantee future prices in order to be able to deliver a price freeze.

“This is all very well if wholesome price continue to rise, but some industry observers suggest the next movement in wholesale energy prices will be down.

“SSE’s competitors might wait to see if this happens, and if it does, they will be able to offer consumers the cheapest prices.”

Mr Morgan said consumers would be better served if suppliers consistently offered fair and reasonable energy prices, as well as simple tariffs to make price comparison simple, rather than publicity-generating price freezes.

“It’s important for consumers to do their research and not simply go with what appears to be the cheapest supplier,” Mr Morgan said.

“If you do decide to go with a supplier that is freezing its prices, ensure you continue to shop around at least every 6 months or so.

“Suppliers change their prices and their products on a regular basis so it’s important to keep track of which one is offering the best deals, and switch accordingly.

“Use a reliable and independent price comparison service to help. It will save you time and headache.”

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