Public contempt for UK energy companies has hit an all-time high since the Great Recession. In fact, energy bosses managed to achieve the impossible: they became an even greater embodiment of greed than the bankers who actually caused the financial crisis.
So how did energy companies knock banks off the top position and assume the role of public enemy number one?
Well it certainly didn’t help that energy bosses decided to impose steep price hikes on a UK public enduring the longest ever squeeze in living standards. It helped even less that the decision to raise prices was apparently not a necessity but simply a way to increase profits. The average profit that energy companies made per household tripled from £30 in 2011 to roughly £105 by 2014. Those figures certainly make it difficult to fathom the claims by energy companies that the price increases were beyond their control.
Public outrage over the nearly 75% increase in profits has made the UK’s so-called ‘big six’ energy companies an easy target for both media and politicians. As some politicians began to call for an energy price freeze, the media gleefully produced a slew of damaging headlines about the evil energy companies.
This week is a prime example: news outlets published a number of stories highlighting the fact that energy companies are actually punishing customers for their loyalty after a report by the Competition and Markets Authority revealed that dual fuel customers were over-paying by up to £234 per year – for Londoners that amount is even higher at nearly £350.
Bad publicity isn’t just coming from the media: some politicians have jumped on the anti-energy company bandwagon, which means that depending on who wins the May 2015 General Election, there could be an energy price freeze. If this happens, the energy companies will finally really lose: they won’t be able to raise prices if they actually need to and the good publicity that lower energy bills will generate goes to the politicians that implemented the freeze.
This makes the recent drop in oil price a very interesting turn of events. It presents a massive opportunity for energy companies to turn around their battered image without hurting their bottom line, since oil and gas prices are expected to stay low until at least 2017.
Yet none of the big six have managed to do this. Yes, some energy firms announced price drops at the beginning of this year. But oil prices have been nearly halved since last June’s peak of $115, and the biggest reduction announced, by British Gas, was a measly 5%. EDF only cut prices by 1.3%. What’s more, these lower prices only come into effect at the end of this month – in other words when the worst of the winter cold is over and energy bills will reduce anyway.
This week the CEO of British Gas owner Centrica hinted that the company could cut prices again later this year, it will probably be too little too late.
Energy companies need to act fast. Passing savings onto the customer would generate plenty of good headlines and could relieve some of the political pressure. After all, if a company is not price gouging its customers with unjustifiably high bills, it is much less likely to incur the wrath of media, politicians and watchdogs.
Energy companies have certainly managed to dig themselves into a hole. But there’s a very good opportunity for any one of the big energy companies to turn this around, especially if they are the first to act. It seems almost incomprehensible that a business would not take the simple steps of following the law and introducing fair pricing and rewards for loyal customers. And since these are conditions that will very likely be enforced soon anyway, why not take the bull by the horn and benefit from all the good publicity that would follow?