Energy Bills: UK Gas Prices Hit Record Low

UK wholesale gas prices have hit a record low, piling more pressure on energy firms to explain why household bills have not been slashed.

The latest fall in raw costs - for November and December delivery - has resulted in a 23% fall over the year so far though bills have remained largely static.

The latest drop was a response to Ukraine and Russia signing a deal to end the threat of supplies being choked off.

The deal will see Moscow resume gas flows over the winter despite their continuing sovereignty row.

The agreement also guarantees delivery to the EU. Russian gas makes up approximately 15% of UK supply.

Raw energy costs, including oil too, have been tumbling in recent months - with Brent Crude losing 25% of its value since June on the back of weaker demand as the world's economic recovery shows signs of easing.

The energy regulator Ofgem told Sky News this week it was seeking an explanation from household suppliers on why they had not passed on to customers the significant falls in wholesale costs.

So-called 'Big Six' firms responded to today's development by insisting that bills reflected long term gas costs not short term pricing.

Companies have recently been tinkering with their offerings, taking their lowest annual tariffs below an average £1,000, but are yet to signal any major cuts to bills despite their wholesale costs diving by almost a quarter during 2014.

Industry body Energy UK said: "There are good deals on the market for customers shopping around and looking to fix their payments.

"Wholesale prices are just part of the bill and, although reduced pressure on the wholesale gas market is good news in the long term, companies buy energy days, weeks, months - even years - in advance to protect customers from sudden changes in costs, and will have bought gas when prices were higher."

Energy firms must use either the wholesale market or a contract with an electricity generator to purchase their energy, which is then delivered to households.

But some suppliers are also part of companies that generate their own energy, so they effectively sell energy to themselves - a situation that has led to calls for greater transparency on profits by splitting generation and supply businesses.

Reported profit levels have recently fallen back to levels not seen since 2009 and companies have consistently argued that their profits are fair and bills reflect not only the timing of their raw gas purchases and hedging strategies but also and high investment costs.

National Grid's latest Winter Outlook report warned that spare capacity was at its weakest level for seven years - a result of several factors including the failure to keep pace with power station closures and unscheduled plant outages.

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