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By Sarah Modlock
These are hot times. It's not just the weather which is warm; energy customers are getting a real roasting. Prices at the pumps and in our homes seem to be fuelling the dazzlingly high profits reported by oil companies. Within a week, British Gas, the UK's biggest domestic energy provider, and EDF Energy have both increased prices for home users for the second time this year. The 35% gas price rise by British Gas was a record-breaker and is gloomy news for its 15.9 million customers. They shoved electricity up 9% too. EDF - with 5.5 million customers - raised its gas prices by 22% and electricity by 17%. Other firms are expected to follow suit. The average household could now see duel fuel bills of around £1,322 a year, an increase of nearly £300 which means customers will be spending around 5p in every pound just to heat their homes, on top of the £110 increase in January. British Gas boss Phil Bentley said: "We very much regret that we have had to make this decision at a time when many household budgets are already under pressure" He added that wholesale gas prices in the coming winter would cost them 89% more than the previous winter. He said the UK was suffering from diminishing gas reserves, and estimated that the UK would import 40% of its gas this year compared with 27% last year. But he did say that standard tariff prices would not rise again in 2008. The rises coincide with British Gas announcing that its profits for the first half of the year were down by 69% to £166m. Meanwhile, quarterly profits came in at £4billion for Shell and £3.4billion for BP. Toxic link Adam Scorer of watchdog Energywatch said: "Whatever the profits made by [British Gas owners] Centrica these price rises are primarily driven by an irrational and toxic link between the price of gas and the price of oil. Just because decoupling that link may be complex and not certain to succeed quickly, is no excuse for not trying. It is now an absolute imperative that Government directs the European competition authorities to explore every avenue that might return some sanity to the gas price. "Centrica have taken steps to shield certain groups of consumers from the worse of the impact, and we do not discount that. But no one seriously thinks that the range of measures from suppliers or the programmes available from government are fit for the purpose of fighting fuel poverty." He added that high prices seem hardwired into this market for the foreseeable future. "That hits the poor the hardest. The most important policy issue facing the government is how to protect vulnerable consumers from these hammer blows. So far it has not taken the necessary steps to fight fuel poverty yet. It needs to act now." In the same week as the fuel increases, the government's Business and Enterprise Select Committee report said problems in the sector needed to be addressed urgently. But it found no evidence that key firms colluded to keep energy prices high. More pain to come? Price comparison site uSwitch said that all suppliers are expected to follow suit with a second wave of price increases adding that industry insiders have been predicting further increases of up to 40% this year. This would take the average household energy bill up to a crippling £1,467. Spending on energy would account for 5% of the average household's net income. It would also mean an unprecedented 61% or £555 increase in the average household energy bill in one year. "This is the second nail in the coffin for affordable energy in the UK - with every price increase we are edging closer to household energy bills hitting a record high," says uSwitch's Ann Robinson. "A potential £555 increase in one year will be a lot for households to absorb and will prove impossible for some. Consumers should begin to make the adjustment now by cutting back on their energy usage and making sure that they are paying the cheapest available price for what they are using. This will help limit the impact of soaring energy bills." Scottish and Southern has already warned customers it was likely to increase electricity and gas prices. Fuel poverty The tipping point for fuel poverty is when a household spend more than 10% of its income on fuel bills. The latest rises will undoubtedly push more people into this group which is currently 2.5million-strong. But Energywatch says the figure is more than four million and that 1,000 homes a day are being pushed onto more expensive pre-payment meters because they are getting into debt with utility bills. British Gas and EDF have both delayed the price increases for its customers already identified as needy until next Spring. But Gordon Lishman, director general of Age Concern, said fuel vouchers should be introduced for the poorest pensioners, social tariffs should be made compulsory, and customers on pre-payment meters should not be charged more. Fix or cap? As more cheaper fuel packages are withdrawn from the market, uSwitch warns customers to sign up to a competitive fixed or capped price energy plan before it's too late. ScottishPower's decision to close its fixed price plans to new customers follows npower's removal of its last remaining fixed price plan on the 24th July. It leaves only four fixed and capped energy plans on the market as a potential shelter for consumers concerned over mounting household energy costs. "This is now the last call for consumers to fix their household's energy prices for the future," says Ann Robinson. "The move by another major supplier to remove a competitive fixed price energy plan from the market suggests that these plans are not going to be around for long. I would urge people to now make this a priority or risk seeing the last competitive deal slip through their fingers." Table showing currently available fixed and capped plans
Based on a medium user profile consuming 3,300kWh of electricity and 20,500 kWh of gas per annum. Customer paying by fixed monthly Direct Debit. All bill sizes averaged across all regions. Source: uSwitch.com. Prices correct as at 29 July 2008. Useful links: |
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