Last week, British Gas and Scottish Power became the first major energy providers in the UK to announce price rises in their gas and electricity charges for this summer. Scottish and Southern have now announced similar rises and the rest of the big energy suppliers are expected to follow suit.
The companies say that the wholesale cost of energy has increased by over 30%. As such, providers in the UK claim they will need to rise the cost of their bills in order to maintain their profits.
The increase in wholesale energy prices has in turn been blamed on a number of factors such as instability in the middle east, the rise of Asian economies and a greater demand for energy that goes with it. Even the Japanese tsunami has had an impact on the industry.
Scottish and Southern Energy, who recently announced in increase to their pre-tax profits of 29%, have now confirmed that they will be increasing electricity bills by an average of 11% and gas bills by an average of 18% from 14th September this year. These rises are similar to those recently announced by the British Gas and Scottish Power energy companies.
When the amount of these rises in energy prices are factored in with the other rises over the last 5 years, it suggests that the average increase to consumers energy bills amounts to £500 over the period. However, although the wholesale cost of energy has increased, it still remains approximately 33% less than in 2008.
Recent figures released by the Consumer Focus watchdog have suggested that 5 million British households are already considered to be in fuel poverty. Consumer Focus believe that this figure will rise to 6.5 million when the remaining companies announce their price rises.
Mr Mike O’Connor, the chief executive for Consumer Focus, is calling for the Competition Commission to investigate the energy market should the regulator Ofgem fail to determine whether these recent price rises are fair or not, adding: “Currently consumers cannot tell whether these increases are justified and that stokes the lack of trust in energy firms.”
Ann Robinson, a spokesperson for the energy analyst Uswitch, has suggested that the rises in energy costs are likely to see the topic become an important political debate and believes that the government need to take steps and review its energy policy.
The government currently want the main energy suppliers in the UK to invest £200 billion in improving Britain’s energy infrastructure over the next 10 years. However, experts believe that this will further increase the costs of energy for consumers even though it will help with carbon emission reduction and efficiency.
The energy secretary Chris Huhne has not welcomed the news from Scottish and Southern Energy. He believes that it further justifies the plans to reduce Britain’s dependence on fossil fuels and create a cleaner and cheaper variety of energy sources. He also indicated that there are plans to help increase competition in the energy market.
