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
    -2

    Comment number 316.

    @ 298.Some Lingering Fog
    It will not stop anyone from moaning you are right, they are ill informed and too lazy to form a sensible opinion based on facts, they want the magic energy fairy to deliver free electricity and gas, petrol, water etc to their house so they do not need to spend anything, they forget if it was all state owned then it would be badly run

  • rate this
    +6

    Comment number 315.

    When is all this going to be stopped...certainly not by this Govt. too many vested interests! Just wait until the vulture type overseas registered private healthcare providers get their teeth into the NHS. I just hope our GPs and their CCGs have more sense and dont succumb to the pressure from Rupert Murdoch's friend Jeremy Hunt!.

  • rate this
    +9

    Comment number 314.

    I do hope customers realise the disaster that privatisation has caused. These price hikes represent simple profiteering for big companies. Note how the Tory government will do nothing to help poor and ordinary families despite the excessive charges that will arrive. They're only interested in their rich chums, to whom they sold these public assets in the first place. Time for renationalisation.

  • rate this
    +16

    Comment number 313.

    What I'm struggling with is how I've just managed to sign a new contract for gas at work and it's significantly cheaper than it was this time last year because of the abundance of supply.

    Someone somewhere is not telling the truth and I doubt it's my company supplier doing me a favour and cutting prices when they could be charging more.

  • rate this
    +4

    Comment number 312.

    It would cost too much to take the energy companies back into public ownership but (and I confess I don't know how these things work) would it be possible to just start up a new companies to compete e.g. Scottish Utilities, English Utilities etc. and we would then have a choice to buy our power from these. They could be non profit with money going back into investment or reduced bills.

  • rate this
    -2

    Comment number 311.

    This is bound to help cut down on CO2 emmissions. All the lefty tree huggers should be thrilled.
    Also if you are all so against BG making profit why not buy some shares in BG and you will be quids in.

  • rate this
    +3

    Comment number 310.

    It`s a great way to kill off the pensioners and the sick - the govt are loving every moment of it.Greedy shareholders want more and more and more.The regulators are told to turn a blind eye and head for the Caribbean- a perk from the energy companies.Britain is a hell hole.

  • rate this
    +2

    Comment number 309.

    Should we be surprised prices are going up?
    The reliance on costly, unpredictable wind energy.
    Delay after delay in new nuclear means gas is the only short term alternative - pushing up demand and hence prices.
    EU directives to reduce power station pollution.
    I dont say these are wrong - but they are not cost free

  • rate this
    +4

    Comment number 308.

    So the current government has been able to impose on LAs no increases in Council Tax, making life easier for hard working families etc, but have no influence over the Big 6 utility companies which pre Sid and his mates etc they did have influence over. As a past Tory voter, not easy to say but re-nationalisation has something going for it!

  • rate this
    +5

    Comment number 307.

    251.SeeSense

    Who's OFGEM again?

    Official Fraud Guarantor for Energy Moguls

  • rate this
    +2

    Comment number 306.

    I was with British gas and when I left 3 weeks ago, they rang me and offered me a credit (£90) to stay. Why don't they look after their customers? They prefer their shareholders instead. Talk about rip off Britain. So people, you have a choice. You can pay the BG. shareholders or move supplier and save money. Its so simple. Comparison websites will hopefully be busy soaking up new customers.

  • rate this
    +28

    Comment number 305.

    my home has double glazing, top rate loft insulation and cavity wall insulation, what more can I do? I am a pensioner with no spare cash, even with the winter bonus I still struggle when it is cold and have to keep heating to minimum. What a world we live in.

  • rate this
    +1

    Comment number 304.

    Solar,solar,solar,solar,solar.

  • rate this
    -3

    Comment number 303.

    254 stuart.

    Iam not a cretin just a realist. If you want something you have to pay for it. If you want to cut you energy bills, fit solar panels to heat your water. If you DIY it can be done for about £ 1000, sounds like a lot of money but it can save around 25% of you hot water bill. Pay for itself in about 4yrs. If you live in a flat the land load my help. It should be mandatory on new build

  • rate this
    +3

    Comment number 302.

    Resistance is futile. The government believe in free enterprise it drives down prices (for the enterprise) & opens up competition (really).
    Gas discoveries are actually running higher than consumption at the moment so its not a supply issue its a casino spot market issue and guess where one of the spot markets is? you guessed it the City.

  • rate this
    +1

    Comment number 301.

    @269

    I think in 2002 those companies paid the govt £32 billion for their licences!!

  • rate this
    +5

    Comment number 300.

    As a student, I look forward to having my non-existent money taken away from me. Again. Bravo. Loans, no jobs, higher energy costs, higher tuition fees - I'm starting to think a degree was a bad decision.

  • rate this
    +5

    Comment number 299.

    Owen Peterson (he's meant to be the Minister for the Environment but seems clueless) said this week that subsidies for insulation could result in the government doing the wrong thing... But I wonder...'wrong for whom'? The big companies whose interests the government looks after - or the people who live in the country.

    Is this some sort of 'free market fascism' ?

  • rate this
    -1

    Comment number 298.

    It could be worse, we could all be living in mainland Europe where energy prices are generally considerably higher than in the UK.

    http://www.energy.eu/#Domestic-Gas
    http://www.energy.eu/#Domestic-Elec

    Won't stop you all having a good old moan now will it though....

  • rate this
    +4

    Comment number 297.

    What a fix, pretty much bet if british gas never announced price rises npower wouldn't of either. The state should control the things that humans need in order to survive, it morally wrong for people to make money off human survival.

    Water and energy should be in state hands, no profit should be made from basic human needs.

 

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