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
    -9

    Comment number 176.

    People will have to stop moaning and simply use less energy. Times are tough and extreme measures will have to be taken. Buy a wood burning stove, put a jumper on if your cold etc. Generations before us did it why should we find it so hard?

  • rate this
    -1

    Comment number 175.

    The charts show very clearly that the price rises follow the increases in wholsale cost but when the wholesale cost falls the price decrease is a fraction, resulting in net rises with each increase and decrease cycle.

    To blame this on government policy and wholesale cost is lazy and disingenuous

  • rate this
    -2

    Comment number 174.

    In their defence the kw/h price in the uk is around half of what it is in many other EU countries.

    I have to raise a smile at people crying about the costs going up to sustain dividends - if it's that much of a path to riches come and join us, anyone can buy shares!

  • rate this
    +3

    Comment number 173.

    If the government is serious about helping people. It has to tackle corporate greed, scamming, the claim culture and above all rip off Britain.
    But I seriously doubt they want to really help us that much.

  • rate this
    0

    Comment number 172.

    149. ChrisDotNisbet

    http://www.bbc.co.uk/news/business-18994178

    Looks like the energy companies are really struggling to hugely increase their profits during the current period of austerity...

  • rate this
    +2

    Comment number 171.

    Welcome to Maggies Victorian Britain.

    Children free to starve or freeze - its their or their parents choice, we didn't rig the system.
    Can't have disposable income making it into the hands of the masses, only what they need to survive (or perhaps a little less to keep them eager to slave)
    They have given everything that made britain great to leeches - utilities, transport etc just NHS to go

  • rate this
    0

    Comment number 170.

    I dont think renationalisation is a real option due to the huge logistical and "political" challenges. If a profit cap is put in place then through the benefit of creative accountancy you'll find the profit reduce to the cap. One thing is for sure, they will find a way NOT to reduce prices. Even if the wholesale price on the markets comes down. Not sure of a viable way out of this mess tbh.

  • rate this
    0

    Comment number 169.

    doesn't anyone else find it strange that they announce increases just before it gets really cold, the decreases when it warms up and then have the gall to post really big profits?

  • rate this
    +3

    Comment number 168.

    Snouts well and truly stuck in the trough!

  • Comment number 167.

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

  • rate this
    +4

    Comment number 166.

    Private companies pay corporation tax and also have to fund shareholders profits - both are "other costs" which nationalised companies don't have to fund. No way can privatised companies deliver a better service for less money than the public sector - the maths doesn't add up. Turn them into social not-for profit companies or nationalise them

  • rate this
    +5

    Comment number 165.

    High rate "Day" units that run from 7am to midnight and cost formula that would leave stephen hawking scratching his head. Of course there is price fixing! they take us for mugs while the less well off freeze to death. Time for revolution! You keeping warm Dave? Are we all still in this together?

  • rate this
    +11

    Comment number 164.

    Society in the UK is disintegrating.
    The government doesn't have clue how to kick start the economy. Institutions like the police, press and celebs are corrrupt and dishonest. Students are being forced to take exams again because a government appointed body has cocked up results. The system is unfair, the rich have retreated into their castles. Big trouble is brewing unless this changes soon.

  • rate this
    -16

    Comment number 163.

    Tax has to be raised to pay for the things, education, the NHS, benefits, transport and to supply of gas, electric & water to our homes. The government could scrap all tax and make the bankers pay. The banks would move abroad so that would not solve anything. We have to decide what we want and how much we are prepared to pay for it. You could live in a mud hut & collect water from 5 miles away.

  • rate this
    +6

    Comment number 162.

    So... when are we gonna step up to these companies and start protesting?

  • rate this
    +3

    Comment number 161.

    Humm . i wonder if charges of premeditated murder against board members of the energy companies for each person that dies due to being unable to afford to heat their homes would make said companies sit up and wet their collective nappies .

  • rate this
    0

    Comment number 160.

    https://www.ebico.org.uk/

    why would any1 want to stay woth the big 6?

  • rate this
    +1

    Comment number 159.

    Lets hope the original Energy and Climate Change Minister rides in on his white charger to save the day.

    You know the bloke, he was the one who introduced the Climate Change Act back in 2008 which started off this sorry process of loading all your energy bills with green surcharges.

    Climate change isn't killing anyone, the effects of the measures implemented by politicians to address it are.

  • rate this
    +3

    Comment number 158.

    The energy bosses, shareholders and city spivs are laughing all the way to the discredited banks.

    How is it efficent and cost effective to have six companies, six boards of directors and six sets of shareholders controlling and supplying energy?

  • rate this
    0

    Comment number 157.

    Until we put up interest rates the pound will carry on getting weaker.
    One pound is buying 25% less food and fuel than it did 4 years ago. Next year it will buy 30% less (if we're lucky). People with cash are not spending because they know they will need it to pay bigger bills, even though the value of their cash is being eroded day by day.

    Put interest rates up before hyperinflation starts.

 

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