'Unwelcome' rise in energy prices

Written By Unknown on Jumat, 12 Oktober 2012 | 16.50

12 October 2012 Last updated at 04:55 ET

British Gas has announced increases to the gas and electricity prices it charges customers.

It has raised its charges for both types of fuel by about 6%, adding £80 a year to the average dual fuel bill.

Britain's biggest energy supplier said the "unwelcome" increase would come into effect on 16 November.

Its rival 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.

"We know that household budgets are under pressure and this £1.50 per week rise will be unwelcome," said managing director Phil Bentley.

"However, we simply cannot ignore the rising costs that are largely outside our control, but which make up most of the bill."

British Gas also warned that the rising cost of government energy policies was likely to add even more to household bills next year.

Gas flame

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Rising costs

With the average dual fuel bill now more than £1,300, Age UK said many older people were feeling "extremely anxious" about their heating bills.

"Cold homes pose a serious risk to the health of older people, yet huge numbers of older people cannot afford to heat their homes properly," said Michelle Mitchell, director general of Age UK.

The price rises will intensify concerns about fuel poverty, particularly among the old.

Over six million households in England already plan to cut back on their heating this winter because they are worried about affording their bills, according to Audrey Gallagher of the government-sponsored watchdog Consumer Focus.

"Today's price rise will leave customers even more worried about the cost of heating their homes," she said.

She said that the government and the energy regulator should do more to protect households from the effect of growing energy costs.

Continue reading the main story

Analysis

Ian Pollock Business reporter, BBC News


The supply of gas and electricity to UK households is dominated by just six big firms.

Two have now announced imminent price rises.

Three of the others will probably do the same as well, soon.

That is because they like to move as a herd and because they are subject to the same pressures on their costs.

The one exception is E.On, which promised in May not to raise prices again until 2013.

But that is now less than three months away.

There have been occasional price cuts in the past few years.

But take heed of what the regulator thinks: the only direction for energy prices in the coming years is up.

"From next year, an average of £4n will be taken from consumer bills in the form of carbon taxes," she 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."

Insulation

British Gas took the opportunity to highlight its offer to help households improve fuel efficiency by giving them free loft and wall cavity insulation, which it said could save the average household £100 per year on their bill.

The company extended its offer of free insulation to non-customers earlier this year.

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.

Failure to hit the target each year could result in penalties from the energy regulator Ofgem, so most utilities are offering some form of help with insulation as a way of reducing the amount of gas that households burn.

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.

Under the government's Warm Home Discount Scheme, energy suppliers agreed to give discounts on energy bills to older households who receive certain benefits.

Continue reading the main story

What makes up the cost of the average household energy bill:

Gas Electricity

Source: British Gas

Wholesale cost

52%

41%

Delivery to home

22%

24%

Government charges

11%

20%

Operating costs

9%

11%

Profit

6%

4%

When it was launched last year, the government said it expected the four-year scheme to be worth £1.1bn and to help two million low-income households with their energy bills.

North Sea

British Gas last raised its tariffs in August 2011, when gas prices went up by 18% and electricity prices by 16%.

Then in January 2012, it cut its electricity prices by 5%.

The company first flagged up the latest round of price rises in May this year, when it warned that the gas prices it must pay were likely to rise this winter. On top of that, the company faced a bigger bill from the government.

The British Gas boss repeated these explanations when announcing the price rises, claiming that 85% of the price it charges customers is 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 were proving to be some 13% higher this year.

The cost of government policies and the national grid upgrade added £50 to the average household bill this year, and £60 next year, British Gas added.

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%


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