Recent reductions in consumer energy bills could have been much larger and made much earlier, research from consumer body Which? has discovered.
Which? said energy providers had failed to keep standard variable energy tariffs in line with dropping wholesale prices over the past two years.
As a result, homes on standard energy tariffs were £145 worse off last year, or a total of £2.9bn, it said.
Industry body Energy UK stated firms had cut prices as soon as they could.
Richard Lloyd executive director of Which? said: “Our analysis places a massive question mark over how suppliers have been setting prices over the last two years.
“They now need to explain to their customers why bills don’t fall further in response to dropping wholesale prices.”
Currently the big 6 energy firms – SSE, Scottish Power, Centrica, RWE Npower, E.On and EDF Energy – together account for about 95% of the UK’s energy supply market.
Which? said the existence in the market of a range of smaller suppliers offering cheaper prices did not appear to be applying sufficient competitive pressure on these major suppliers to reduce energy bills faster and further.
“In a genuinely competitive market suppliers would be forced to be more efficient and to keep their prices in check as wholesale costs fall,” it said.
However, Energy UK chief executive Lawrence Slade told the BBC that because suppliers buy wholesale gas on the future prices, to try to hedge – or protect – themselves – against future price rises, they didn’t immediately benefit from falls in wholesale prices.
“As prices are falling, as companies can actually afford to pass those savings on, they are doing so.
You can’t suddenly pass the savings in one go, it’s only as your buying strategy unwinds and as you can take advantage of those new cheaper wholesale prices that you can pass these on to your customers,” he added.
How, when and for how much the big suppliers purchase gas and electricity in advance has been a contentious issue for many years.
Purchasing ahead guarantees supplies. It also means customers don’t have the uncertainty of volatile day-to-day prices.
But the firms don’t publicise their “hedging” strategies. How do we know that they pass on savings when they can?
This research aims to shine a light on this opaque world.
The conclusions will make tough reading for the firms with the revelation that households have faced billions in higher costs in the past and are missing out on savings of hundreds of millions of pounds in the year ahead.
Whether the firms really are acting fair with their customers may only become clear when the Competition and Markets Authority reveals the findings of its investigation into the sector later this year.
Wholesale energy costs, which account for the the bulk of energy bills, have more than halved over the past six months, with the price of a barrel of Brent Crude oil currently below $55.
Which? said the recent price reductions in standard gas tariff rates made by all six energy suppliers did not go far enough.
Based on wholesale prices in late January, it said the reductions of up to 5.1%, should actually have been up to 10.3%.
And it found that standard variable electricity tariffs, which have not been reduced , should be reduced by 15%.
Which? said it had forwarded its evidence to the ongoing Competition and Markets Authority’s investigation of the energy market – set to conclude by the end of the year – as well as the Treasury’s investigation into whether energy companies are passing on the savings from falls in the wholesale price of oil.
Maybe now is the time to actually switch to a smaller energy supplier and place your trust in them, First:Utility for example is a lot cheaper than any of the big 6 suppliers and its moto is “We put our energy into… lowering prices”