/ Home & Energy

Npower and Scottish Power jump on the price rise bandwagon

Energy prices sign

Another day, another energy price hike. This time it’s Npower who has hit its customers with the biggest increase yet – a whopping 9.3% on electricity and 11.1% for gas. And then there’s a new nuclear deal…

Npower’s price hike comes on the same day that the government has announced a deal with EDF to build a new nuclear power station at Hinkley Point in Somerset.

After two big price rises already this autumn from the largest energy suppliers, SSE and British Gas, consumers face yet another winter of discontent. But with energy costs likely to continue to rise over the next 10 years, the woeful lack of scrutiny of energy prices can no longer be allowed to continue.

This is why the government needs to be taking much tougher action on making sure that energy prices are fair now – and in the future.

The Hinkley nuclear deal

On the nuclear deal, ministers will claim that we need this new generation, that consumers will not face the cost of new nuclear until 2023 and that in the long-term this will help to lower our bills. Much of this may well be true. But, the problem is that we have to take an awful lot of this in good faith.

And sadly trust in the government, as well as the energy companies, is in low supply when it comes to energy prices.

This is made worse by the fact that the Hinkley deal has effectively been done without any transparent or independent scrutiny. And no mechanism has been put in place to refund consumers, if we find out down the line that this deal has in fact been poorly negotiated and an energy company has received a nice windfall at our expense.

Npower price rise

On today’s Npower price rise, which will add £137 to a dual-fuel customer’s annual bill, we’re yet again in a situation where we have to trust an energy suppliers’ claim that wholesale costs have gone up and that the price of delivering government policies has become more expensive.

When people are struggling to get by – and energy bills are top of your financial worries – we simply can’t afford to be in a situation where suppliers and ministers blame each other for energy price rises.

That’s why action is needed to deal with this now. The government should set up an independent expert review, which can report to Parliament, looking at all energy policy costs – both hitting us now and in the future. This should assess whether we’re all getting value for money and importantly it should recommend areas where savings can be made.

We also desperately need to give the National Audit Office more responsibility reviewing energy costs so that the kind of decisions like today’s over Hinkley are held to account.

Without this, we simply won’t have confidence that our money is being spent wisely.

[UPDATE 24/10/2013] – Scottish Power is the fourth of the big six energy companies to announce a price rise. The increase will hit customers on 6 December 2013, with an 8.5% rise on gas and 9% on electricity. There’s just EDF and Eon to go now…

Comments
Member

I totally agree with an investigation into the energy industry, so we can debate the facts. What is our energy price made up of, on top of the raw energy cost. What are the raw energy costs on the open market. Why are energy costs so similar – particularly from those who are also generators. In something as fundamental as energy – both to households and industry – we need more transparency than in a normal commercial market.
We could also do with the same approach to water, where there is not even a hint of competition.

Member
Phil says:
21 October 2013

You may find this interesting, particularly Page 9.

Member

Phil, an interesting report with some interesting links to other official statistics. For instance, 2012 prices excluding taxes:
UK domestic electricity 14.3% above EU15 median price, ranked 8th out of 15 EU nations
UK industrial electricity 27% above EU15 median price, ranked 13/15.
UK domestic gas 1% ABOVE EU15+ G7 median, ranked 8/15 EU, 3/7 G7
UK industrial gas, small user, 26.6% BELOW EU15 median, and lowest out of EU15.
Why such a big disparity in industrial vs domestic gas?
(we fare better with after tax prices presumably because other nations tax energy more heavily than UK).
Possibly an unfair snapshot but surely we should know just how we compare with our neighbours and why there are significant disparities – the raw energy market is dictated by international prices so what creates significant differences between different countries?

Member

Thanks for the link it and its linked documents. Very interesting reading .

Member
Colin Samson says:
21 October 2013

Things were never this bad when utility companies (gas, electricity, water, sewage & telephone) & the railways were national institutions! Those were all privatised, supposedly to increase competitiveness, improve services & save money. On the contrary, the reverse seems to have happened; the only exception I can think of is buses & long-distance coach travel.

The only beneficiaries are top management & shareholders, who are “creaming off” vast sums of money rather than re-investing it or reducing prices. We need properly controlled RE-NATIONALISATION. Privatisation has generally been an abject failure & is now synonymous with reduced service quality, higher prices & huge taxpayer-funded subsidies.

Member
Peter H says:
14 November 2013

Malcolm R is right about energy costs but doesn’t understand the water industry where there is a great deal of competition, although not obvious to the uninformed consumer.

The Regulator OFWAT determines fixed charges for each water/sewerage company for 5 year periods – they agree what needs to be done in the period to maintain and improve the existing infrastructure and to meet ever rising customer demands and increasingly stringent EU Directives.
OFWAT employs independent consultants to check in great detail each engineering proposal and costs and use the previous 5 year outcome costs as a basis upon which to reduce by considerable margins the estimated cost of the future agreed needs. This provides incentives to make innovative and better solutions for the multi billion pound investments.

Each year OFWAT monitors performance over a range of measures and compares the results against those of all the other companies, publishing league tables that not only encourage companies to do better but heavily penalise financially those lower performing companies.
Furthermore, OFWAT has local consumer groups for each company’s region who keep a close eye on performance.

Water and sewerage charges cause a public uproar but they are my lowest annual cost compared to all my other infrastructure costs, including council tax, energy, petrol, mobile phones, and SKY tv. What other of these providers not only bring you the service, but take the wastel away and safely dispose of it afterwards. The public generally have no appreciation of the extent of the infrastructure needed for this service as it is generally underground or sited in remote places.

Malcolm R’ has valid complaints about the energy companies and seeming lack of competition, but it is difficult to provide proper competition where they generally use the same source for gas or electricity bought at global prices and use the same means of distribution to the customer, along with similar customer and billing centres. Each water/sewerage company has different geographical and demographic needs. Does he wish to set up similar duplication for water, which is very expensive to transport beween companies and prohibitively costly to duplicate the infrastructure?

Member

Peter H, I do not disagree in general with some of your observations. These conversations usually develop well because un-informed or partially-informed participants raise issues that more expert members can respond to.
However, I believe real competition only exists when the consumer is given a choice of supplier. A regulator or independent consultant might do their best to control the market and infrastructure development, but only those with hands-on knowledge can make the most of it – and rhese are the supply companies. I do not suggest duplication in the water industry – no more than exists in energy supply – other than trunk mains which could serve the same role as the national grid.
There are choices open to energy companies for sourcing their electricity and gas – and for the basis on which they buy it.

Member

Some more energy news for you today. Scottish Power is to pay £1m compensation to energy customers who were misled on the doorstep in 2010-11 due to staff who were not properly trained. It will also pay a further £7.5m to vulnerable consumers. You’ll be pleased to hear that Scottish Power no longer does doorstep selling – did you ever answer the door to one of their salespeople?

In other news – new rules start today banning energy companies from increasing prices on fixed-term contracts.Yes, fixed means fixed for energy (why not for mobile?). Ofgem’s rules will also stop you from being automatically rolled over to a new fixed contract, giving you 40 days notice before your existing contract comes to an end and the ability to exit without penalty.

Member
Wasdale says:
7 November 2013

Scottish Power may have stopped cold doorstop selling but it hasn’t become transparent and refrained from engaging in further unscrupulous methods to maximise profits.
It is a master of Obfuscation.
Has anyone not noticed energy companies like Scottish power concealing the price of certain energy price tarifs on their websites so that customers have to telephone the company to find out what the best tarif’s are?. Calling the precise telephone lines that were fined so heavily for mis selling. TALK ABOUT STICKING YOUR HEAD IN THE LIONS MOUTH. They are also selective about which energy price comparison websites show their energy tarifs – TO ALLOW YOU TO MAKE FAIR COMPARISONS. When they are about to introduce future price hikes they pull many energy tarifs from the market in advance or do a very good job to conceal their cheapest tarifs.
Are they interested in helping their customers or do they repeatedly mislead them for pure unadulterated profit?
Only a complete idiot could fail to see the correct answer to the above question.

Member

Wasdale, I agree Scottish Power is poor at disclosing details of tariffs – if you want the standing charges and unit charges. However their website seems to show quite a few tariffs with annual costs for a “typical” dual-fuel user, and clicking “more info” against each tariff then shows the annual cost for low, medium and high users. I found this quite well presented and useful.
I like to see unit costs and standing charges spelled out. To get to these you have to click “view our product notes” and then click “Tariff leaflet” where you will find the details. A bit long winded but it is all there. Some suppliers make cost details easier to find.

Member

Facts are key to this debate. On yesterday’s news it was stated that wholesale gas costs have not increased over the last two years. Is this true or not? Or have forward-buying prices increased? Who knows the truth?

Member

Energy is a natural monopoly. There will probably never be more than one wire and one gas pipe to a given property, at least for most places, so the illusion of competition is doing nothing other than adding cost.

What’s quite ironic is that a lot of our power (and of course some of our rail as well) turns out to be state-owned, but by another state!

Nuclear power is the best, cleanest and most pragmatic option for base load in the UK right now. The financial risks are such that it is fanciful to expect it to happen without the government backing and underwriting it. It’s time to be honest with ourselves and accept that there is actually nothing wrong with the state doing this!

Member

Using a single distribution system – wires, pipes, roads, rail for example – makes economic sense – you don’t want the unecessary costs of duplicating them. The competition should be about tendering for the use (rental) of the wires and pipes by the energy suppliers, and the cost of the energy they then put into the pipes and wires.
Tidal power – tidal flow or storage – is a very unexploited source of carbon and pollution free energy that is abundant around our extensive coastline. Would you prefer to see £45 billion spent on a railway line, or invested in tidal energy generation? Or even in 3 nuclear power stations?

Member

Tidal and wave power have a big uphill battle in the UK. The nuclear lobby used some pretty shoddy tactics to undermine Salter and the Severn barrage, and there is a lot of stubborn pride now invested in remaining “right” while being wrong 🙂

Member

Can anyone explain this information from the Scottish Power press release?

“7. Why is the ‘No Standing Charge’ option being removed?

Whilst we have historically offered this option, this is no longer allowed under Ofgem’s Retail Market Review. Ofgem’s Retail Market Review (https://www.ofgem.gov.uk/retail-market-review/retail-market-review-publications) aims to increase transparency and simplicity of prices, and as part of this review all tariffs must now be structured as a standing charge and unit rate.”

But if you look at the cited Ofgem document you read that they are “Simplifying tariff structures to ensure that all tariffs have a simple standing charge (which could be zero) and unit rate structure.

So Ofgem specifically states that standing charges can be zero but Scottish Power uses Ofgem as the reason for removing zero standing charges.

Member

Good spot, sir!

Member

Ofgem’s proposals in the Retail Market Review Aug 2013 include:
“Simplifying tariff structures to ensure that all tariffs have a simple standing charge (which could be zero) and unit rate structure (no multi-tier tariffs).”
This means existing two tier tariffs – where you pay a higher unit rate up to a usage limit, and a lower rate thereafter – will no longer be allowed. Allowable tariffs will all consist of a unit rate (price per kiloWatt hour) plus a daily standing charge. The standing charge can be zero – meaning you would only pay per unit – with another tariff having a lower unit rate plus a non-zero daily standing charge.
Whether all suppliers will offer both of these remains to be seen but I suspect most will.

Member

True. But why is SP discontinuing a zero standing charge tariff on the basis that Ofgem doesn’t allow it when Ofgem does allow a zero standing charge?

Member

This is what SP says under its FAQs

Ofgem, the energy regulator, is introducing new requirements on all energy suppliers, which are intended to help make your tariff choices clearer. These new obligations include moving existing customers who have No Standing Charge prices to prices that include a Standing Charge (called a Daily Service Charge). These Daily Service charges cover the fixed costs to service a customer’s account that don’t vary regardless of how much energy they use. Going forward, all tariffs in Great Britain will have a Standing Charge element, making it easier to compare.

This is untrue and misrepresents Ofgem’s position.

Member

This does not seem to be a true reflection of Ofgem’s proposal. Scottish Power should either change their answer or be reported to Ofgem – perhaps Which? coiuld follow this up?

Member

we need to RENATIONALISE – the utilities – OR TAX them more – GREEDY GREEDY- Never vote Tory

Member
David says:
25 October 2013

Richard, we had 13 years of labour government from 1997 and they didnt do anything about the energy industry – apart from reducing competition to 6 large suppliers!

Member

We had 30 years of Tory Misrule that privatised everything so we no longer had a viable country – frankly Labour’s rule was far better – Renationalise all Utilities

Member

Scottish Power raised their prices less than 24 hours after I used Which? switch to switch to their March 2015 fixed tariff. Obviously the switch itself will take a couple of weeks, so am I too late or are they obliged to honour the tariff the switch website was offering?

Member

I tried to contact Scottish Power today as they owe me money after I left them for another supplier. The queueing time on the phone line to be answered was….4 to 6 hours! Can anyone beat that !!!

Member

Scottish Power does offer to phone you back and provides the opportunity for you to select a time slot.

Member

I tried this and it worked for me.

Member
Paul Hunt says:
25 October 2013

What on earth would an ‘independent expert review’ achieve? Most of the so-called ‘experts’ are compromised, constrained or conflicted in some way. In any event, even if these ‘experts’ described the current situation honestly and accurately – extremely unlikely because their terms of reference would be drafted to prevent this – and concluded that the current energy industry structure in Britain and the framework of policy and regulation are totally dysfunctional and that these are incapable of bearing the burden of implementing the climate change agenda what on earth could a supine, frequently by-passed and Government-dominated Parliament do to remedy this?

Although Britain pioneered this flawed model of privatised, liberalised electricity and gas industries – with a mix of competition and regulation – which is being applied throughout the EU and most developed economies – with the notable exceptions of the US and Canada – very few of the problems may be resolved in Britain. The main problems are at the global and European levels and it is at these levels that remedies will be found.

Wholesale gas prices in Europe are far higher than they need be – and this feeds in to higher electricity prices since most of the time in most markets gas-fired generation sets the wholesale price of electricity. These gas prices are higher than they need be because the EU’s major external suppliers are able to exercise (abuse) far too much market power. For far too long there have been cosy deals between the big European gas buyers – the EU’s Big 7 (four of the UK’s Big 6 are subsidiearies of 4 of these) – and the external suppliers that have exploited final consumers. Up to recently the major EU national governments (of France, Germany, Italy, for example) supported and encouraged the cosy deals struck by their energy ‘national champions’. It is only recently that DG COMP of the European Commission has been allowed to investigate the antics of Gazprom in Eastern Europe which seriously penalises many gas consumers there. There is a requirement for much more concerted and coherent EU effort to impose some discipline on the external suppliers. Part of this would include putting pressure on the US as part of the EU-US free trade deal negotiations to speed up approval of LNG export facilities. It would also include modifying this stupid, British-originated Entry-Exit approach to gas transmission pricing and allowing a functioning market in pipeline capacity to emerge. This would facilitate increased interconnection and internal EU trade and further diminish the market power exercised by the external suppliers. It would also help to attract the investment financing required.

Since only it has the appropiate powers and authority, DH COMP should conduct a new energy sector sector leading to the break up of the vertically Big 7 and the other vertically integrated players that dominate the smaller national markets into production/generation/wholesale suppy businesses and retail businesses.

When it comes to network regulation, regulators claim they represent the interests of consumers. This is nonsense. They arrive at their regulatory decisions following negotiations with network owners and operators – with huge asymmetry of information. They claim to strike a balance between the interests of investors and consumers, but consumers are not represented independently in these negotiations. The public consultation process is a total sham. Consumers need effective, statutory advocacy and representation of their collective interests in open adversarial hearings against the networks owners and operators and with regulators making determinations on the basis of the evidence and testimony presented and tested. Consumers interests should be represented sinilarly in the inquiries and investigations of competition authories. The current statutory bodies, for example in the UK the CAS and Consumer Futures (previously Consumer Focus), are a total waste of space. Voluntary bodies, such as Which?, not surprisingly, are even less effective.

Finally, the tax treatment of investors in the long-lived, specific assets which characterise the energy industry must be addressed. The huge expansion of energy sector investment in the US which is moving it towards energy independence was facilitated by the existence of Master Limited Partnerships which pay no tax once they pass through all returns to the investors.

These are the remedies that are required. They will require effective engagement with the EU and concerted, coherent effort at the EU level. But with Britain edging towards the EU exit, we can forget British participation in the development of the necessary remedies.

Member

Before we become too hot under the collar let’s remember that both companies offer one or more fixed price tariffs. Perhaps energy bills and tariffs are difficult to comprehend but I’ve found the staff at Npower and Scottish power able to discuss ones needs in detail and come up with a solution. I think much of the problem lies with customer apathy/lazyness.

Member

My letter Oct 2013 states . Your DD of 40 pounds discount for continually paying by DD, will be spread over the next 12 months. The Standing Charge will be increased from 36 to X [you guessed it the 40 Pounds] and the unit rate is changing to 15.89 [vat Included]. So the way I see it, if you have been with NP for over 12 Months you are slightly better off as the unit price before was 16.08 with a standing charge of 9.9/day.

Member

I’ve just spent 20 minutes on hold trying to get the exact times that our Economy 7 charges kick in. As the full charge is 13.97 and Economy 7 is 5.77 it is an expensive mistake to use our appliances at the wrong times. We’re with EDF and surely it is not unreasonable to expect this information to be prominently displayed on the bill? What I found out was that these times vary from area to area and I was put on hold while my meter code was checked against the times. I wonder why there is not a standard time for everyone and whether the purpose is to lull us into spending more on the higher rate? I discovered that our particular time runs from 12 to 7 and in answer to my further questioning that this changes to 1 to 8 during British Summer Time.

Member

I agree that the times should be easy to find, June. I don’t use Economy 7, but I checked the website for Scottish Power, my supplier. Most of the times are given but times vary for customers in three of the distribution areas – which is not very helpful.

I suggest you look at your meters at switchover time at night or in the morning and check what is happening.

Member

june p, i imagine you have checked whether economy 7 is worthwhile? With EDF you seem to need to use at least about 30% of your electricity off peak to save money. I was with npower and that needed around 45% – there was no way I could use that between 12:00 and 7:00am.

Member

Thanks for your replies wavechange and Malcom R.
Our home is run solely on electric with an air-source heat pump which functions overnight. The split is roughly 50% on Economy Seven in summer and 60% to 70% in the winter. As you can see, with rising charges it is essential that we know the times of cheaper energy.
In spite of switching and fixing, our bills have risen by about 20% in the 4 years since we have had our heat pump but it still seems to be the most cost-efficient way of buying energy in an area with no access to gas,

Member

Heat pumps do seem to be the best option for areas without mains gas. I was tempted to move to a house without gas, but with recent price rises, I am fairly glad I did not. Please be careful with running washing machines etc. overnight to save money, June. I have read about fires and a few have been mentioned on this site.

Member
Helen says:
31 October 2013

I have only seen two smaller energy companies mentioned or represented in the many discussions, and at the House of Commons committee hearing, these are Ovo and Co-op. There are several others, one of which I have been with for several years and am as happy as I can be in a manipulated market. The company tells me regularly how this year’s usage compares with last, and I have clear indication of my unit cost so that I can do my sums. Cheaper bills would be welcome but that is up to the government, innit?

Member

I would like to know if OFWAT can stop Thames Water charging more, why can’t OFGEN stop the energy companies putting their prices up?

Member
Paul Hunt says:
14 November 2013

@June,

I can understand why you might be confused. Successive govenments and regulators have a hugely complex edifice about which most citizens have little knowledge, but it suits the regulated businesses and the agencies involved – and the army of advisers, consultants, experts, lawyers, accountants, PR types, etc that have become bloated parasites.

OFWAT ‘regulates’ the prices the water companies charge. It’s this weird and stupid British system of regulation which is based primarily on a ‘negotiation’ between the regulator and the companies – with the companies having almost all of the relevant information. As a result, most regulators have been captured by the businesses they’re supposed to be regulating.

Occasionally, though, a regulator will slap down some egregious price-gouging – just to show it has some teeth. This seems to be what has happened in this case. But I wouldn’t be fooled in to believing that the system of regulation of water is working to protect the interests of users.

OFGEM, only regulates the networks – the pipes and the wires – direcly. There has been no formal regulation (in terms of price controls) of wholesale or retail energy electricity or gas supply activities for than a decade. This area is everybody’s responsibility (OFGEM, the OFT, the FCA, the Competition Commission) and, as a result, nobody’s responsibility. Therefore the Big 6 can, more or less, do what they like. OFGEM is empowered to penalise them for deceptive and fraudelent practices – and frequently does so, but the fines are a tiny fraction of their turnover and they claw it back (and more) in price hikes.

Quite simply the Big 6 need to be broken up in to wholesale and retail businesses, but this will have to start at the EU level. Four of the UK’s Big 6 are subidiaries of the much, much larger EU Big 7. Of course, no British government will engage effectively with the EU to develop solutions to the current problems. So British consumers will have to put up with constantly increasing electricity and gas prices. Ed Miliband’s proposed price freeze is beyond stupid.