/ 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.