Npower and British Gas raise energy prices

 

Richard Lloyd of Which? talks about his "shock and disbelief" at the price rises

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Npower has joined rival British Gas in announcing it is increasing gas and electricity prices in the UK.

Npower will increase the price of gas by an average of 8.8% and electricity by 9.1% from 26 November.

Earlier, British Gas, the UK's biggest energy supplier, raised its charges for both types of fuel by an average of 6%, adding £80 a year to the average dual fuel bill.

The firms both blamed the government's policies as well as wholesale prices.

SSE - which trades as Scottish Hydro, Swalec and Southern Electric - has already said it will raise its prices by an average of 9% from Monday.

"There is never a good time to increase energy bills, particularly when so many people are working hard to make ends meet," Npower's chief commercial officer Paul Massara said.

"But the costs of new statutory schemes, increases in distribution charges and the price of gas for the coming winter are all being driven up by external factors, for example government policy."

British Gas recognised that its increase, which will take effect from 16 November, would be "unwelcome".

It also warned that the rising cost of government energy policies, including boosting renewable energy, improving households' energy efficiency and helping the poorest customers, was likely to add even more to household bills next year.

The cost of government policies and the national grid upgrade added £50 to the average household bill this year, and is expected to add another £60 next year, British Gas said.

Rising costs

Case study

British Gas customers Heather and Gabriel Manzolini are a retired couple from Romford.

We're already paying £1,750 for council tax while our home fuel bill is nearly £1,200 a year and now it's just going to go up.

We only renewed our contract with British Gas two weeks ago so we're not happy at all.

We've tried to make our house as energy efficient as possible - there's nothing more we can do.

We need heat. I am recovering from cancer [and] my husband Gabriel had a stroke.

Gabriel was given a heating allowance aged 60 when he didn't need it; he was ashamed as he was in a full-time job. But now when we need it, it has halved - everything goes up day-by-day while our pension goes down.

We'll have to cut back on everything and turn the heating down as low as possible. We'll have to wear a lot of wool, too, and cut down on our other costs - such as spending on food.

Speaking to the BBC, Richard Lloyd of consumer group Which? criticised the lack of competition in the energy market.

"What we need to see is action from the government and more pressure on... these very big lazy companies who think it's OK to clobber people with above-inflation price rises at the very time when they can least afford it," he said.

Watchdog Consumer Focus said two price rises in one day would add to householders' worries that they were not getting a fair deal.

"Unless they can be reassured about the relationship between costs, prices and profits, consumer distrust will continue," said Consumer Focus director Audrey Gallacher.

British Gas managing director Phil Bentley claimed that 85% of the price it charged to customers was outside its control.

"Britain's North Sea gas supplies are running out and British Gas has to pay the going rate for gas in a competitive global marketplace," said Mr Bentley.

"Furthermore, the investment needed to maintain and upgrade the national grid to deliver energy to our customers' homes, and the costs of the government's policies for a clean, energy-efficient Britain, are all going up."

It said that winter wholesale prices it pays were proving to be some 13% higher this year.

Speaking to the BBC, Mr Bentley pointed out that although wholesale prices are actually currently lower than a year ago, British Gas, like most utilities, fixes the price at which it buys gas well in advance, and these fixed prices had risen.

The company reported £345m profit in the first half of the year, but the chief executive said that he expected profits to be down in the second half.

"Our margins are 5p in the pound," he told the BBC. "That 5p is going into jobs for Britain, investments in new wind farms, investments in new gasfields."

Graph showing the typical electricity bill over time
Insulation

Despite rising prices, the number of people switching suppliers is falling, which consumer groups suggest is more evidence of lack of trust in the market.

"The recent price increases mean it is more important than ever that consumers are able to shop around for the best deal," said regulator Ofgem.

"Next week we will be announcing the next steps in introducing major reforms to make the household energy market simpler, clearer and fairer for customers," it said.

Consumer Focus said that the government and the energy regulator should do more to protect households from the effect of growing energy costs.

Graph showing typical gas bill over time

"From next year, an average of £4bn will be taken from consumer bills in the form of carbon taxes," Audrey Gallacher said.

"Using a proportion of that revenue to fund a much more ambitious energy efficiency programme could start to tackle fuel poverty and provide a jump start to our energy efficiency industry."

All the energy utility firms are obliged under the government's "Certified Emissions Reduction Target" (or "Cert") programme to cut the carbon dioxide output by households.

British Gas extended its offer of free loft and wall cavity insulation to non-customers earlier this year. Consumer groups suggested the company had done this because it risked missing targets.

British Gas claimed that customers that had already implemented energy saving measures had seen their fuel consumption drop by up to 40%, and as a result the average total fuel bills of its customers had not risen faster than inflation, despite the increases in fuel charge rates.

In addition, under the government's Warm Home Discount Scheme which began last year, energy suppliers agreed to give discounts on energy bills to older households who receive certain benefits.

Speaking to the BBC, energy minister Greg Barker said the scheme would mean two million of the poorest families would get £130 towards energy bills.

Labour said it would introduce a new energy regulator with powers to force energy companies to pass on savings to consumers and automatically put over-75s on the cheapest deal.

Energy price changes since Nov 2010

Scottish Power SSE British Gas Npower E.On EDF

G=Gas. E=Electricity.

Nov 2010

G:2% E:8.9%

Dec

G:9.4%

G:7% E:7%

Jan 2011

G: 5.1% E: 5.1%

Feb

G:3% E:9%

Mar

G:6.5% E:7.5%

Aug

G:19% E:10%

G:18% E:16%

Sept

G:18% E:11%

G:18% E:11%

Oct

G:15.7% E:7.2%

Nov

G:15.4% E:4.5%

Jan 2012

E: -5%

Feb

G: -5%

G: -5%

E: -6%

G:-5%

Mar

G:-4.5%

Oct

G: 9% E:9%

Nov

G:6% E:6%

G:8.8% E:9.1%

 

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  • rate this
    +5

    Comment number 16.

    The sooner this country starts to access its shale gas reserves the better and start building coal powerstations we are crippling ourselves with good green intentions whiles all our so called business rivals all over the world dont care a bit whilst we punish ourselves and build expensive gas powerstaions and import LNG from halfway around the world and the profits leave to fund foreign projects

  • rate this
    +64

    Comment number 15.

    Graphs tell a very clear story. With respect to gas, wholesale energy prices have gone up by approx £100/customer since October 2005 yet cost to consumer goes up by £350/customer in same period.

    Increase are quick and directly related to wholesale yet they do not come down as quickly or by as much.

    Just an observation!

  • rate this
    +2

    Comment number 14.

    So if the wholesale gas price has risen 25% and household bills have risen almost 100% this means obviously the gas companies are profiteering

    But we also have to account for Labour's stealth taxes

  • rate this
    +6

    Comment number 13.

    They could not have picked a better time to announce this [sarcastic] but then the utilities know that this quarter is their "cash cow" period, so a bit sneaky TBH I feel, why not announce any increase spring!

    Blaming Gov for green policies is an excuse as the utils have under invested for years to reap profits, and Centria have made huge profits of late so no justification for this rise. IMHO.

  • rate this
    +5

    Comment number 12.

    What as surprise , Winter is here!!

  • rate this
    +37

    Comment number 11.

    Here we go again, the whole cartel lined up to raise prices, one after each other. Three down, three to go, all by the end of the year except EOn which said it wouldn't raise prices this year - January 3rd for them then.

  • rate this
    +3

    Comment number 10.

    Banks, energy companies, each successive government, all have noses in the trough. The trouble is that we are the fodder that they are desperatley trying to get bigger mouthfuls of. When will it stop? What would happen if one day we all decided to stop paying?

  • rate this
    +9

    Comment number 9.

    Weather turns a little nippy so the fat cat energy firms fleece the customer .. Again! What a lame duck toothless regulator we have. This rise is over 3x the rate of inflation and not a peep.

    This will drive more into fuel proverty, and the burden of benefits to cover the short fall goes onto the tax payers shoulders again. Time for the Government to actually do something to help their people

  • rate this
    +8

    Comment number 8.

    Despite being more right than left politically, its about time we nationalised the energy providers to remove what is profiteering for something you cannot do without in this country.

  • rate this
    +64

    Comment number 7.

    after hearing my gas provider will be wanting more cash from me, we have just bought today 2 x wood burning stoves for our house, 4 ton of logs for £150 this will be our heating this and every year. no way will i continue to be held ransom by these gready lot.

  • rate this
    +6

    Comment number 6.

    they are making millions a year this should not be able to happen there should be a cap on what they can charge.

    Get some storage built for this and not sell the gas on and buy it back at a stupid rate.

    Log burning stove is the way forward for me

  • rate this
    +8

    Comment number 5.

    Renationalise the energy infrastructure NOW, or these leeches will continue to take ever larger chunks of our money to fund their champagne and caviar.

  • rate this
    +8

    Comment number 4.

    PUTTING prices up just before the winter months IS a good time for nPower and not a good time for customers.

    Cynical statement: "There is never a good time to increase energy bills..." Npower's chief commercial officer Paul Massara said.

  • rate this
    +7

    Comment number 3.

    Stand by to be bent over by the energy companies yet again...would it be too much to ask for the government to do something about energy and petrol costs? Alas I believe so....

  • rate this
    +105

    Comment number 2.

    The article says :"British Gas claimed that customers that had already implemented energy saving measures had seen their fuel consumption drop by up to 40%"
    ----
    And that's the problem - we are using far less energy, so the energy companies are whacking up their prices to make up for lost profit.

    They are not doing us any favours - but they think we are all too stupid to spot what they are up to.

  • rate this
    +37

    Comment number 1.

    This doesn't surprise me in the slightest. But what would surprise me is if the Government responded with a sensible bit of legislation or action for once and raised the living wage, even if it just enough to cover the inevitable rise that comes from all the energy suppliers. What's the point of working if you still can't afford to live?

 

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