The chief executive of one of Britain’s largest power companies yesterday called for an investigation into the energy market, acknowledging that his industry was not trusted by consumers.
Tony Cocker, of E.ON, said a commission should be set up when bosses of the “Big Six” energy companies were taken to task by MPs for the latest series of price rises imposed on households.
Faced with public anger over the rising cost of heating homes, industry leaders were grilled by MPs on the Commons energy and climate change committee who accused them of charging “the maximum price they feel they can get away with”.
The energy companies were also taken to task after only two of the “Big Six” chief executives appeared before the committee in person. The other four sent lower-ranking executives to answer questions.
“It’s a disgrace that the same energy bosses who have imposed huge price rises are refusing to defend them in front of MPs,” Labour’s Ian Lavery said.
“The energy bosses aren’t just turning their noses up at the House of Commons, they’re also turning their noses up at millions of hard-pressed consumers who do not understand why they are facing even higher energy bills this winter.
“It might be half-term for the energy bosses, but ordinary working people face a winter of misery because of these greedy companies and their unjustified price hikes.”
The executives who did appear before MPs were left in no doubt about the frustration felt by customers over the recent prices rises. There was also criticism levelled at the size of executives multi-million pound pay packets at a time when a growing number of householders were struggling to pay their bills and heat their homes.
Labour MP for Glasgow North West, John Robertson, asked the company representatives: “Do you understand that the people of this country do not trust you? Whether you like it or not some people in my constituency have to worry about whether they are going to heat or eat.”
Mr Robertson warned that “thousands” of people were dying of hypothermia because they could not afford to pay their bills.
As one of the two chief executives to appear, Mr Cocker acknowledged consumers had lost trust in the market dominated by his company; Centrica-owned British Gas, Npower, SSE, ScottishPower and EDF.
Mr Cocker told MPs he had written to Prime Minister David Cameron calling for a competition commission to be set up to investigate the industry in a bid to “depoliticise” the debate.
“I fundamentally believe that this market is competitive, but I acknowledge we are not trusted and therefore I believe we need to have a very thorough competition commission investigation,” Mr Cocker said.
But Mr Cocker’s suggestion was dismissed by Labour leader Ed Miliband, who said that “nothing less” than his party’s call for a price freeze would satisfy consumers.
The idea was also dismissed by Centrica, the parent company of British Gas, which said it would not be helpful.
“We believe it unnecessary as the market is competitive,” said a spokesperson. “There have been numerous inquiries into the energy market and none have found any evidence of anti-competitive behaviour.”
There was also anger over executives’ pay packets expressed by the Labour MP Albert Owen who questioned the company representatives about the fairness of giving big pay rises to top staff while customers were struggling to pay their bills.
Mr Owen said he was a customer of British Gas – adding that he might not be for much longer – and pressed the company’s managing director of energy, Ian Peters, over why the restraint on the pay of consumers was not being shown by executives.
The company has increased bills by 38 per cent since 2008, and the remuneration of the chief executive of British Gas parent firm Centrica, Sam Laidlaw, jumped by 36 per cent to £2.35 million in the same period, he complained.
Mr Laidlaw was one of the four chief executives who did not turn up for the committee.
Mr Peters said executive pay was a bigger issue than that faced by the energy industry, adding that the firm’s remuneration committee would be “well aware” of what was being said.
Neil Clitheroe, chief executive of retail and generation at ScottishPower, revealed that 60,000 customers called the company with concerns “virtually straight away” when the firm announced its 8.6 per cent increase in bills last week. “It is the hardest decision we take,” he said.
Before the committee met, there was anger that MPs were to be denied the chance to question Mr Laidlaw, Paul Massara, chief executive of Npower, Alistair Phillips-Davies of SSE and EDF’s Vincent de Rivaz.
The executives who stood in for them, blamed the imposition of green taxes for recent hikes, which saw SSE increase bills by 10 per cent, British Gas by 10 per cent, Npower by 9.3 per cent and ScottishPower by up to 9 per cent.
Guy Johnson, external affairs director of Npower claimed the largest driver of price rises had been the cost of the so-called climate obligation on power firms.
The green taxes cover the period to March 2015, so the energy firms will have to fulfil a large part of their obligation next year, he said. “That was a concern when we were considering prices for next year,” Mr Johnson said.
Mr Johnson said firms were faced with increases in wholesale prices of 3 per cent, increased transport costs of 10 per cent, while costs such as the environmental obligations had jumped by 31 per cent.
“External costs are driving our price increase,” he maintained.
None of those appearing yesterday felt inclined to apologise for the price rises, but William Morris, managing director of SSE, said he regretted having to increase bills for customers, who were “struggling to maintain their budgets”.
Greenpeace policy director Doug Parr said: “For the Big Six to try and use green taxes as a fig leaf for rising energy prices marks a new low for them, which is saying something.”
Stephen Fitzpatrick, managing director of Ovo Energy, one of the smaller brands, said he “can’t explain” the price rises because his company was buying gas cheaper than it had in 2009.
“It looks to me like a lot of energy companies, a significant number of the Big Six, are charging the maximum price they feel they can get away with to the customers that they feel will not switch under any circumstances.”
Miliband insists nothing less than a price freeze will do
Labour leader Ed Miliband has dismissed the “list of excuses” offered to MPs by energy firms, blaming rising bills on them overcharging hard-pressed customers.
He rejected the idea of a Competition Commission investigation into the market, saying “nothing less than a price freeze” would do.
Mr Miliband, whose promise to freeze bills for 20 months if Labour won the 2015 election has sent the issue to the top of the political agenda, said what was needed was action rather than a review.
He said: “What we’ve heard today was a list of excuses from the energy companies.”
Responding to E.ON chief executive Tony Cocker’s call for a Competition Commission investigation, Mr Miliband said: “We don’t need more excuses, more reviews, what we need is action. Action against companies that are overcharging people and taking advantage of a broken market.
“That’s why it’s so important that we implement Labour’s price freeze, which is what we’ll do, and reform a broken market so there’s proper competition, proper transparency and a regulator who can cut prices for consumers.”
He said green levies were not the reason for rising bills, but the charges should offer “value for money”.
Mr Miliband said: “We should always have value for money in whatever costs there are on bills. But when the companies and the government say that the problems of the cost of living crisis to do with energy aren’t to do with overcharging, they are wrong.
“That’s why I’ll accept nothing less than a price freeze.”
Mr Miliband added: “I think everybody knows by now that the market’s not working. There are still some people who are trying to defend that broken market – the energy companies, this government – but I am determined we act.
“Frankly, hard-pressed families need someone who’ll stand up for them. That’s what I’m doing and that’s what I’ll do as prime minister.”