Energy firms face ministers’ wrath over sharp price rises

TWO energy suppliers have been condemned by the government as “completely unacceptable” for increasing prices while a rival keeps them frozen.

Scottish Power announced this week that it was raising its standard tariffs by 7.8 per cent, adding about £86 to annual dual fuel bills for 1.1 million households. Npower had already announced a 9.8 per cent rise. British Gas, however, said that it was freezing its prices until August.

The Department for Business, Energy and Industrial Strategy said: “The British Gas price freeze is good news for five million households but it is completely unacceptable for other suppliers to increase their prices significantly when Ofgem has said there is no case for doing so.”

Last week the government said that it was “concerned” by Npower’s rise. A government source said it was considering all options for intervention in the energy market. A green paper on consumer markets is due in the spring.

Ofgem, the regulator, said that it did not see a case for price rises but that there “may be particular factors affecting individual suppliers”. It added that they would need to justify why prices were going up or risk losing customers.

Scottish Power blamed its price increase primarily on rising wholesale gas and electricity costs. It said that government policies to subsidise green energy and the cost of installing “smart” meters had also contributed.

Iain Conn, chief executive of Centrica, which owns British Gas, said that it had reduced costs despite increases in green levies and paying for the installation of smart meters.
“We are determined to be competitive,” he said.

Centrica, which is cutting 6,000 jobs, is expected to announce it made increased profits of £1.5 billion in 2016.

Experts said that British Gas’s standard tariff – £1,044 a year for a typical household – was £210 more expensive than the best deal on the market and urged customers to switch.

Martin Lewis, of MoneySavingExpert, said: “The most important message for all customers, including British Gas, is if you are on your company’s standard tariff, you are massively overpaying.”

Mr Conn said British Gas’ standard tariff was now cheaper than 95 per cent of tariffs on the market. Scottish Power’s standard tariff will cost £1,167 a year following a price rise that comes into effect at the end of next month. Npower’s price rise takes its tariff to £1,187.

EDF Energy, announced in December that it was raising prices by 1.2 per cent, taking average bills to £1,082 a year.

Lakis Athanasiou, a City analyst, said he had been expecting British Gas to raise its electricity prices but also to cut gas prices sufficiently that the changes would have cancelled each other out. The decision to instead leave both sets of prices unchanged was “genius PR” that would have very little impact on the company’s expected profits for this year, he said.