Business

Energy firm E.On to raise electricity and gas prices

Gas
Image caption E.On is the last of the major suppliers make an announcement on prices this winter

Customers of energy firm E.On will see a 9% increase in electricity prices and a 3% rise in gas prices from 4 February.

The supplier said it had "no option" but to increase prices because of the rising wholesale cost of energy.

E.On is now the fifth of the "big six" energy companies to have increased prices this winter.

Energy regulator Ofgem is currently investigating the prices charged to domestic customers.

'No option'

Energy companies that have raised bills this winter have pointed to the cost of buying gas on the wholesale markets as key to the decision.

E.On has repeated this, although its prices will rise about a month later than many of the other suppliers.

"It has been over two years since we last increased our prices, and, unlike other companies, we held off from increasing them during the incredibly cold temperatures we saw in late November and December," said Graham Bartlett, managing director of E.On's Energy Solutions business.

"But we now have no option but to make this change due to increases in the prices we pay for gas and electricity, although our customers will not actually see the increases until next month."

He added that customers on E.On's social tariff would not see prices rise until April.

However, a typical dual fuel customer will see their annual bill increase by £62 following the price rises, according to calculations by price comparison website Uswitch.com.

Other suppliers

E.On's announcement makes it the last of the major domestic suppliers in the UK to make an announcement on prices.

EDF Energy has said that it is keeping its prices on hold during the winter, with no change before March 2011.

But in the last week of November, Scottish Power increased electricity bills by an average of 8.9% and prices for gas customers increased by an average of 2%.

Scottish and Southern Energy followed by putting up its domestic gas tariffs by 9.4% at the start of December. The 7% rise in gas and electricity prices for British Gas customers started on 10 December.

Npower customers saw their gas and electricity prices rise by 5.1% on 4 January.

Review

The rises have been criticised by watchdog Consumer Focus.

Image caption Ofgem is investigating the domestic energy market for the second time in three years

"E.On's customers will, sadly, not be shocked that it has followed in the footsteps of other suppliers' price increases. However the fact that these rises are not unexpected will not make it any easier for cash-strapped consumers to afford their higher bills," said Richard Hall, energy expert at Consumer Focus.

"Consumers simply do not trust that suppliers are asking them to pay a fair price for their energy. With high prices, a complex market, and consumers being asked to pay billions of pounds to improve our energy supply, it is essential that confidence in energy prices is improved."

The watchdog has called on the companies to be more transparent about profit margins.

Regulator Ofgem is reviewing the domestic energy market to see if more action is needed to protect consumers.

The work will be completed by March 2011, and will study the "effectiveness of the retail market".

Energy UK, which represents the major energy suppliers, said it had "nothing to hide" during a review.

A previous investigation of the market in October 2008 found no evidence of anti-competitive behaviour in the sector.

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