EU Households Missed Out on Biggest Gas Price Drop in Five Years

  • Electricity, gas bills rose more than 2 percent in 2014
  • Switching process too complex, hurts competition: report

As a global oversupply caused gas and power prices to fall the most since 2009, European households ended up paying more for their fuels last year.

The average European Union household bills for gas and electricity each rose more than 2 percent from a year earlier in 2014, according to an annual report released Monday by the 28-nation bloc’s Agency for the Cooperation of Energy Regulators. That came as benchmark gas prices dropped 28 percent and power fell 17 percent.

The inverse relationship is a result of expanding fixed costs, including taxes to subsidize renewable energy projects, regulated prices that don’t reflect the cost of supply and lack of competition, according to the report by ACER and regulatory lobby The Council of European Energy Regulators.

“Many markets are highly concentrated, with low switching activity by consumers and high retail prices, despite falling wholesale prices,” it said. “Even in markets which have a relatively low level of market concentration and perform well on other measures of market competition, the link between electricity wholesale prices and the energy component of retail prices is still weak.”

While customer choice has increased as utilities offer more cleaner-energy options, lack of trust in new suppliers and a perception that monetary gains will be minimal mean only few users switch, easing competitive pressure on providers, according to ACER. Those who do try to switch often struggle to find standardized information about the benefits of changing suppliers, making the process prohibitively complex, it said.

“We’ve only got 11 percent of consumers regularly shopping around for better deals,” Ann Robinson, director of consumer policy at London-based service comparison company uSwitch said by telephone on Monday. “If we all start shopping around on a regular basis that increases competition. Competition, I believe, is the best thing to keep prices down.”

After-tax household electricity bills rose on average 2.6 percent last year while gas costs increased 2.1 percent. Gas for next-month delivery in the U.K., a European benchmark, has fallen a further 23 percent this year on the ICE Futures Europe exchange. German baseload power for next month has dropped 12 percent, according to broker data compiled by Bloomberg.

Industrial Users

Adding clearer information online about utility options would help boost competition and offset further increases in bills, the regulators said. Fixed costs of utility bills are likely to rise next year as programs to manage capacity in the EU electricity network expand, according to the report.

Unlike residential consumers, industrial power and gas users have not felt the pain of higher bills. Their costs have more closely tracked the fall in the price of fuel because they are subjected to fewer non-contestable fixed charges, the report said.

Post-tax electricity and gas prices for industrial consumers in 2014 decreased by 0.2 percent and by 6 percent, respectively.

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