Darling: I want answers over energy price hikes

Published on 06/01/2008 20:51

ALISTAIR Darling has summoned energy regulators into a Whitehall meeting to discuss the cost of power after one of the UK's biggest energy suppliers announced double-digit price increases.

The Chancellor has written to Sir John Mogg, who chairs the Gas and Electricity Markets Authority, and Alistair Buchanan, the chief executive of the industry regulator Ofgem, to ask them to investigate the impact of recent wholesale gas and oil price rises on the wider UK energy market.

Mr Darling's intervention, seen at Westminster as a thinly- veiled warning to energy companies over pricing, came after Npower announced rises of 17.2 per cent for gas and 12.7 per cent for electricity in a move that will hit more than four million UK households. It will see an average annual bill with the company jump by 95 for gas and 64 for electricity, meaning that homes that use the company for both will see their average dual bills rise above 1,000.

Experts predict that other energy suppliers will soon follow with price rises of their own.

Npower is also introducing regional pricing for gas for the first time. London and the East Midlands will be hit hardest, with some customers suffering a 23.8 per cent rise.

Scotland and Wales are expected to face a more modest rise of 8.7 per cent.

Most power companies are following ScottishPower and Scottish & Southern in introducing regional gas prices, in part to reflect transportation costs. Electricity pricing already varies between regions.

Consumer groups have criticised Npower, Britain's fourth- largest supplier, and other energy groups, for the rises.

They say that power companies are keen to pass on increases in wholesale prices as soon as they happen, but dislike reducing them when costs fall.

The price comparison website Uswitch.com said that last week's price increases wiped out decreases made by Npower last year, which lasted just eight months in the summer.

Mr Darling is understood to be concerned that power companies often buy bulk supplies nine months in advance and wonders why a sudden short-term increase at the wholesale level should lead to families having to pay more.

Energyhelpline.com, which also offers a price-comparison service, forecast that the UK's other five main suppliers would increase prices by 15 per cent in the next two months.

Its chief executive, Paul Green, said: "Market conditions are similar to those in 2006, when we saw multiple price rises.

"This year, we can expect customers to see between two and three price rises due to volatility on the wholesale market."

Andrew Horstead, head of energy research at the consultancy group Utilyx, said Npower was using record oil prices of more than $100 a barrel and rises in the cost of gas as a "smokescreen" to restore profit margins.

In his letter to Sir John and Mr Buchanan, Mr Darling said:

"I would be particularly interested in your views on the relationship between wholesale price movements and feed-through to domestic retail prices and the likely availability of gas supplies from the Continent for the remainder of the winter in 2008."