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 156.

    "why doesn't one company reduce it's prices? it would get more business to compensate less profit"

    Because then all the others would have to reduce prices to keep their customers from leaving them! So, to prevent this they have all agreed not to do it... Look up CARTEL

  • rate this
    +6

    Comment number 155.

    @103 tonep , you dont live on this planet do you, if it all went back to the state then they dont need to make profit! they could chuck £2m off the top right there on one wage, then remove the shareholders, and lets not forget we subsidise Europe because most of the energy companies are owned over there, grow up lad, learn to count.

    As said clear profiteering screened by spineless government

  • rate this
    +5

    Comment number 154.

    Our governemnt is beyond belief when they keep telling us we are all in this together, They forgot to mention except energy companies.

    It is time for everyone to stand togther and refuse to pay any more increases after all they wont switch us all off as they wont have any income at all.

    Dont take this laying down, stand up UK citizens.

  • rate this
    0

    Comment number 153.

    @25.mccj14
    My wood burning stove..........

    So your one of those who have increased my bills by billowing out smoke so all my laundry has to go through the tumble dryer! Thanks - I don't think!

  • rate this
    +12

    Comment number 152.

    A few more shivering children and old folks this winter.....the government should hang it's head in shame.

  • rate this
    +1

    Comment number 151.

    117. uncleub
    Prices always go up pre winter,never post winter...why?"

    Supply & demand.

    Energy retailers are buying more supplies from a smaller supply pool, so the wholesale cost goes up.

    Like it or not, the world is running out of cheap energy supplies. Stock up on woolly jumpers.

  • rate this
    +4

    Comment number 150.

    Time for customers to regain control. Pick one of the major supply companies, say the next one to raise its prices, and boycott them on mass. Such organised customer action will panic all the suppliers, and force them to cut their excessive profits. After all some profit is better than none at all. If the company chosen is foreign owned all the better, as governments will be involved.

  • rate this
    -11

    Comment number 149.

    British Gas only make 5% profit!
    What other company that services 16million homes across the UK has such a small profit?

  • rate this
    +2

    Comment number 148.

    Once one of the big 6 put their prices up the rest follow, like sheep.

    Having the heating on or having food to eat on the table, a question many pensioners will be asking themselves now.

  • rate this
    +91

    Comment number 147.

    This is a cartel pure and simple, blatant price fixing. One puts prices up, the others follow. Privatisation was sold to us as a way of increasing competition and efficiency and driving down prices. It is one huge scam, designed to maximise profits at our expense and line the pockets of shareholders and the board. Re-nationalise is the answer, rail, utilities. Telecoms hasn't performed too badly.

  • rate this
    +4

    Comment number 146.

    Well, it looks as though the A+E department I used to work in are going to be even busier this winter. Remember, I had to leave due to the impending 15% wage cut that followed the 3 year pay freeze. Shame the NHS is under attack, looks like we will be needing them this winter.
    The bottom line is never measured in £'s, only lives.

  • Comment number 145.

    All this user's posts have been removed.Why?

  • rate this
    +4

    Comment number 144.

    People know the answer re nationalisation ,then every 5 years or so those most at risk of fuel poverty the old traipse in in their millions and vote Tory!

    Must be the cold effecting their brains.

  • rate this
    +1

    Comment number 143.

    Everyone talking about how the red "margin" line isn't very high is missing a very key point. Included in the "other costs" would be salaries, and as you can see the gap between blue and orange lines increases dramatically over the 6 years. So they're not only making the 5%, the fatcats at the top are pocketing £x million more than that on top.

  • rate this
    0

    Comment number 142.

    They try and convince us every year they need to increase prices.But decrease them by a similar amount ,each company..odd?Huge profits,now blaming outside influences whatever that is.Windfall tax them all for the nations good and restrict the increases and monitor director and senior executive pay rises.

  • rate this
    +8

    Comment number 141.

    103.tonep

    its not rocket science, Re-nationalise the energy companies, at least the profits go back into the government rather than some foriegn shareholder. Rasing prices is morally wrong when you have the poor who will struggle even more, especially poor pensioners living on state pensions. Profit before peoples lives!..and there is no real competition between the companies.

  • rate this
    +2

    Comment number 140.

    Now I know it has been tried before with petrol companies and failed but if somehow there was a UK wide public uprising to 'say' transfer individual's business away from one of the Energy Big 6 to 1 or more of the other 5, something would have to give. I'm on a fixed rate deal with EON but if EON were chosen to be boycotted I'd love to give it a try.

  • rate this
    +6

    Comment number 139.

    This winter there will be tens of thousands of excess winter deaths because poorer older people can't afford to have the heating on.

    These price rises will make that worse.

    Why is it ok to put your profit margin before the lives of others?

  • rate this
    +3

    Comment number 138.

    "British Gas is offering free loft and wall cavity insulation, which it said could save the average household £100 per year on their bill..."

    As Jason mentioned too, the more the consumer 'saves' energy, the higher the price per kWh will be in the end, because the energy companies need to maintain their profits...

    British Gas exists because it sells kWh at the highest possible price.

  • rate this
    +7

    Comment number 137.

    These utility companies should hold there heads in shame for putting up bills just before Christmas. Do they not care for there vulnerable customers who are suffering from fuel poverty ? I guess we are having to pay for there jolly boys Christmas bashes while the rest of us queue up at the Soup kitchens !

 

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