All of the ‘big six’ energy companies have now hiked their prices in time for winter, and for the second time this year, leaving British consumers even harder pushed in a difficult economic climate.
These huge increases in prices have left people wondering why the suppliers are allowed to hike their prices when the cost of wholesale gas and electric is actually falling. The anger from consumers around the UK has sparked an independent inquiry from industry regulator Ofgem and calls for the case to be referred to the Competition Commission.
Rising domestic energy prices
Now that all of the big six suppliers have increased their prices consumers can decide whether to fix or switch their tariff in order to cut gas and electric costs. Details for each of the company’s price increases are below:
Scottish Power: 19% for gas and 10% for electricity to take effect from 1st August 2011
British/Scottish Gas: gas will increase by 18% and electricity 16% with effect from 18th August 2011
Scottish & Southern Energy: electricity prices increase by 11% and gas prices by 18% from 14th September
E.ON: price rise of 18.1% on gas and 11.4% on electricity to take effect from 13th September 2011
nPower: price rises of 15.7% gas and 7.2% electricity won’t take place until 1st October 2011
EDF: Electricity price rises of 4.5% (in line with inflation) and gas price increase of 15.4% to come into effect from 10th November 2011
The final provider to jump on the bandwagon was EDF Energy earlier in the year but their hikes didn’t come into force until March 2011 as they had a large scale marketing campaign for fixed prices. EDF held off on increasing their prices until 15th September 2011 – at the time, before it announced its price increase, analysts predicted that they were simply holding off, taking advantage of customers who were switching providers.
Wholesale energy prices
Every one of the energy companies has blamed their price hikes on the rising cost of wholesale gas and electricity and the natural disaster in Japan. The uproar around the massive price hikes has come from the fact that wholesale gas and electricity prices have been falling.
Last month The Daily Telegraph reported that electricity prices on the open market were at their lowest point for the year, £45.2 per megawatt-hour, and day-ahead gas was at the lowest price since early November 2010 – 49.9p per therm.
What is being done?
The demand for answers about the price hikes has sparked an investigation by Ofgem. The regulator has asked the companies to explain how they have reached their profit estimates, and how they have calculated the price increases being passed on to customers.
Alison Wright, a spokeswoman for Ofgem, stated that: “Ofgem’s role is to protect consumers by making sure the market works effectively. Last year, we launched a wide ranging review of the retail market and concluded that energy companies are failing consumers by stifling competition by a combination of tariff complexity, poor supplier behaviour and a lack of transparency.
“We are pressing ahead with reforms that include sweeping away complex tariffs in order to expose energy suppliers’ prices to consumer power. Ofgem has also appointed accountancy firm BDO to provide recommendations on how best to improve accounting disclosures by energy suppliers,” Ms Wright continued.
Is Ofgem failing British consumers?
The regulator has been under increasing pressure from consumers after it was revealed that the wholesale costs were falling while profits were increasing. The British public are demanding for more to be done about the situation as government cuts and increased inflation is making it a difficult time to live in.
Mark Todd, spokesman for Energyhelpline.com, said that the reason the regulator has been so relaxed about the price hikes and profits so far is because “the UK regulators believe in the free market and thus support it”.
He said: “You are therefore unlikely to see them criticising price rises for this reason as they see it as the necessary response to increasing cost pressures on the suppliers. Also if they criticise too much they would be really criticising themselves as they are the architects of the UK energy market.”
Save money on energy bills
Mr Todd went on to say that consumers have a free choice and should be trying to find ways to save money on energy bills and cut gas and electric costs:
Mr Todd said: “As a customer the key thing to remember is that a free market means that, as well as the suppliers being free to choose the price they charge you, you have the power to withdraw your custom and get a cheaper deal. This is the best way to fight back against price rises; in a word, switch.”
If you are considering switching supplier it is absolutely essential that you compare gas and electric to ensure you are going to save money on energy bills.
With the ‘big six’ increasing prices, comparing the entire market is the only way to cut gas and electric costs. Once you have found a cheaper supplier, consider signing up to a fixed tariff in order to prevent being affected by any further price increases in the next couple of years
