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David Cameron energy price pledge row deepens

 

The government has played down a pledge by Prime Minister David Cameron that energy firms will be forced to give all customers the lowest tariff.

Mr Cameron made the surprise announcement on Wednesday at prime minister’s questions.

But a minister summoned to the Commons to explain what the PM meant said the details had still to be worked out.

John Hayes vowed to help consumers “get the best deal” – but Labour accused the government of being in “chaos”.

Shadow energy secretary Caroline Flint said it had been a “shambolic mismanagement of energy policy” in what was “probably the quickest U-turn in British history”.

Mr Hayes told MPs the Energy Bill, which the government plans to publish next month, will reform the energy market and increase competition.

 

Analysis

Norman Smith Chief political correspondent, BBC News Channel


Confused?

Well, you’ve every right to be.

The government say they want to introduce legislation to help consumers with their fuel bills. That much is clear.

What is a good deal less clear is if they plan – as the prime minister told MPs on Wednesday – to make companies pass on the lowest tariffs.

In other words, to use legislation to force firms to give customers the best deals available.

Today ministers have carefully refrained from repeating Mr Cameron’s tough message.

Indeed Energy Minister John Hayes said ministers would evaluate existing voluntary agreements “to see if legislation is needed.”

This confusion has prompted Opposition accusations of another omnishambles – or as some on Twitter have begun to refer to it “a combi-shambles”.

And at a time when the government is seeking to re-assert its credentials for competence – in the wake of the West Coast Rail upset – it’s a row Mr Cameron could well have done without.

He said the government needed a “robust” relationship with the six big energy firms and would take the “necessary steps to ensure people get the best possible deal”.

A number of options were being considered, he confirmed, including an evaluation of whether voluntary agreements made by the energy companies in April should be “made binding” through legislation.

Under this voluntary arrangement the six main energy providers agreed to contact customers once a year to tell them what the best tariff is for them, and how to get it and to contact customers coming to the end of a fixed-term contract with the same advice.

“This is a complicated area and we will discuss with the industry, consumer groups and the regulator in order to work through the detail,” Mr Hayes said.

Speaking to the BBC, Energy Secretary Ed Davey confirmed he was working on a plan to require energy companies to inform customers of the lowest tariffs available, but did not mention the prime minister’s more radical proposal to force them to charge the lowest tariff.

“I’ve been working with the deputy prime minister and others, working with the energy companies, to try to drive more competition, to get them to agree that they will tell their customers what are the best available tariffs, so customers can save money,” he said.

 

Reference – ” http://www.bbc.co.uk/news/uk-19986929 “.

Electricity prices set to rise again in 2012…..

British Gas raises gas and electricity prices

 

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.

 

Rising costs

Speaking to the BBC, Richard Lloyd of consumer group Which? criticised the opacity and lack of competition in the energy market.

“What we need to see is action from the government and more pressure on… these very big lazy companies who think it’s OK to clobber people with above-inflation price rises at the very time when they can least afford it,” he said.

“Everybody knows that this is a market that is not competitive, not properly working for consumers.There is very little pressure on British gas to be efficient and to keep these price rises to a minimum.”

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.

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

 

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.

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

The British Gas boss claimed that 85% of the price it charges customers is outside its control, including wholesale gas prices and the cost of government policies to try to reduce emissions and help the poorest households.

“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.”

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

It said that winter wholesale prices it pays were proving to be some 13% higher this year.

Speaking to the BBC, Mr Bentley pointed out that although wholesale prices are actually currently lower than a year ago, British Gas, like most utilities, fixes the price at which it buys gas well in advance, and these fixed prices had risen.

The company reported £345m profit in the first half of the year, but the chief executive said that he expected profits to be down in the second half.

“Our margins are 5p in the pound,” he told the BBC. “That 5p is going into jobs for Britain, investments in new wind farms, investments in new gasfields.”

 

Reference –

 ” http://www.bbc.co.uk/news/business-19921042 “.

More to pay on our energy bills…

 

The energy regulator will permit firms running the UK’s electricity and gas grids to add an average £12 to annual energy bills for the next eight years to pay for upgrades and maintenance.

Ofgem said it had cut £7bn from the total cost of work on UK transmission networks planned by energy firms.

The biggest of these firms by far – National Grid – said it was reviewing the “lengthy and wide ranging” plans.

Meanwhile a lobby group warned 300,000 more homes faced imminent fuel poverty.

Energy prices have risen 7% on average this year, according to the Fuel Poverty Advisory Group, and are set to leave more households paying more than 10% of their income on home heating unless the government takes action.

Tax change

Ofgem’s announcement will enable £24bn in total investment in the energy networks up until 2021.

However, an Ofgem spokesperson told the BBC that over half of the £12 bill increase was not due to physical investment in the network, but was instead because of a change in accounting rules which would mean that energy firms could no longer claim back tax on the cost of replacing parts of the network.

The regulator’s announcement represents a slight increase on the £22bn investment allowance that Ofgem initially proposed in July – adding an average £11 to bills – which was attacked by National Grid for being insufficient.

 

“In analysing the proposals, we find numerous errors and questionable judgements which we cover in detail in our response,” the company had said of the initial plans in an open letter to Ofgem.

Under Ofgem’s revised proposal, the average increase in annual bills between 2013 and 2021 will equal £12, starting close to £8 at the beginning of the period, and rising to £15.10 by the end.

If National Grid chooses to challenge Ofgem’s new decision, it has until March to refer the matter to the Competition Commission.

National Grid and the distribution firms do not charge households directly for the cost of maintaining the grid, but the cost is instead passed through by electricity and gas suppliers.

The total cost of transmission and distribution comprises about 21% of gas bills and 10% of electricity bills.

Underground cables

Ofgem said that the increase in allowances compared with their July proposal was because the regulator had agreed to let gas network firms charge more for the cost of replacing gas mains.

 Energy Secretary Ed Davey: “The big drivers on energy bills are wholesale and network costs”

National Grid operates the UK’s national electricity and gas grids, as well as four of the country’s eight regional gas distribution networks.

The electricity network in Scotland is owned by two other firms – Scottish and Southern and SP Energy Networks.

Ofgem had already reached an agreement with the Scottish firms in March over their investment plans, the cost of which will contribute £3.70 of the £12 average bill increase, to be borne equally across all UK households.

The planned investment spending across the UK is split between £15.5bn on electricity transmission and distribution, and £8.7bn on gas.

The investments will, among other things, hook up new wind farms and nuclear power stations to the electricity grid to replace traditional coal-fired power stations, and enable more liquefied natural gas imported from Qatar and elsewhere to be added to the gas network as North Sea gas supplies dwindle.

Other improvements will include the running of new and some existing high voltage cables underground, particularly where they affect areas of outstanding natural beauty, and the construction of a new undersea link connecting Scotland with England and Wales.

The spending on the gas network will also finance spending by the energy firms on raising public awareness about the risk of carbon monoxide poisoning.

 

Reference – ” http://www.bbc.co.uk/news/business-20753715.

Npower and British Gas raise energy prices

 

Npower has joined rival British Gas in announcing it is increasing gas and electricity prices in the UK.

Npower will increase the price of gas by an average of 8.8% and electricity by 9.1% from 26 November.

Earlier, British Gas, the UK’s biggest energy supplier, raised its charges for both types of fuel by an average of 6%, adding £80 a year to the average dual fuel bill.

The firms both blamed the government’s policies as well as wholesale prices.

“There is never a good time to increase energy bills, particularly when so many people are working hard to make ends meet,” Npower’s chief commercial officer Paul Massara said.

“But the costs of new statutory schemes, increases in distribution charges and the price of gas for the coming winter are all being driven up by external factors, for example government policy.”

British Gas recognised that its increase, which will take effect from 16 November, would be “unwelcome” and warned that the rising cost of government energy policies was likely to add even more to household bills next year.

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.

Rising costs

Case study

British Gas customers Heather and Gabriel Manzolini are a retired couple from Romford.

We’re already paying £1,750 for council tax while our home fuel bill is nearly £1,200 a year and now it’s just going to go up.

We only renewed our contract with British Gas two weeks ago so we’re not happy at all.

We’ve tried to make our house as energy efficient as possible – there’s nothing more we can do.

We need heat. I am recovering from cancer [and] my husband Gabriel had a stroke.

Gabriel was given a heating allowance aged 60 when he didn’t need it; he was ashamed as he was in a full-time job. But now when we need it, it has halved – everything goes up day-by-day while our pension goes down.

We’ll have to cut back on everything and turn the heating down as low as possible. We’ll have to wear a lot of wool, too, and cut down on our other costs – such as spending on food.

Speaking to the BBC, Richard Lloyd of consumer group Which? criticised the opacity and lack of competition in the energy market.

“What we need to see is action from the government and more pressure on… these very big lazy companies who think it’s OK to clobber people with above-inflation price rises at the very time when they can least afford it,” he said.

“Everybody knows that this is a market that is not competitive, not properly working for consumers.There is very little pressure on British gas to be efficient and to keep these price rises to a minimum.”

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.

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 British Gas boss claimed that 85% of the price it charges customers is outside its control, including wholesale gas prices and the cost of government policies to try to reduce emissions and help the poorest households.

“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.”

 

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

It said that winter wholesale prices it pays were proving to be some 13% higher this year.

Speaking to the BBC, Mr Bentley pointed out that although wholesale prices are actually currently lower than a year ago, British Gas, like most utilities, fixes the price at which it buys gas well in advance, and these fixed prices had risen.

The company reported £345m profit in the first half of the year, but the chief executive said that he expected profits to be down in the second half.

“Our margins are 5p in the pound,” he told the BBC. “That 5p is going into jobs for Britain, investments in new wind farms, investments in new gasfields.”

Reference – ” http://www.bbc.co.uk/news/business-19927350 “.


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