Utilities firm Npower has announced the largest price rise yet this year as it followed in the footsteps of SSE and British Gas to hike bills by 10.4 per cent.
The firm blamed government energy reduction schemes for the rise, alongside increases in the cost of delivering power to homes and the raw materials required to generate energy.
NPower is the third of the Big Six energy companies to increase prices in recent weeks.
Prime Minister David Cameron has come under increased pressure to tackle escalating energy bills. Labour have promised a 20-month price freeze if it comes to power in 2015, a promise Tory and Lib Dem ministers have branded a “price con” while being unable to find a response to it. The increases have also seen the energy companies, led by SSE, claiming that “green taxes” such as the carbon floor level should be scrapped.
Labour leader Ed Miliband said the latest announcement underlined the need for a price freeze. “Neither the energy companies, nor the government, want Labour’s price freeze because they are content for prices to carry on rising at 10 per cent a year,” he said.
“We’ve got a Prime Minister who is standing up for the energy companies, not hard-pressed families. That’s why we need Labour’s price freeze. The reason prices are going up is because you’ve got a broken market and you’ve got companies that are overcharging people. That’s why we need to take action.”
But Npower chief executive Paul Massara used the price rise announcement to attack Labour’s price freeze policy.
Asked for Mr Cameron’s response to Npower’s announcement, his spokesman said: “Nobody wants to see higher bills. He very much understands why households are angry.”
Energy secretary Ed Davey said the UK government would continue to press for firms to be transparent over any price rises.
He added that there were now 15 independent companies competing with the so-called Big Six, so consumers had more choice of supplier.
In Scotland the SNP have promised to cut bills by having the taxpayer pay for green taxes instead of the energy companies.
Yesterday, deputy first minister Nicola Sturgeon said: “It is extremely disappointing Npower has followed British Gas and SSE with a significant hike in fuel prices, which will cause a 10.4 per cent increase to households, many of which are already struggling to pay their energy bills.
“We need a sustainable solution to the problem of energy bills, which is why, with the powers of independence, this government would tackle fuel poverty head on by reducing energy prices by five per cent or around £70 per household and meeting the costs of fuel poverty and energy efficiency schemes through government spending.”
In addition to the Big Six rises, smaller firm Co-operative Energy last week said it would add an extra £4.78 a month to the average bill, but said it was absorbing half of the rising costs into the business rather than passing them on to the consumer.
“The floodgates have been well and truly opened, and with Npower’s price rise confirmed, we’re halfway to a full-house of price rises from the big six energy providers,” said Jeremy Cryer, energy spokesman at price comparison site Gocompare.com.
“Winter price hikes are unwelcome, yet unfortunately entirely predictable. But it’s not over yet, and Scottish Power, E.ON and EDF will surely reveal their price hikes soon too.”
Mr Massara, meanwhile, insisted the company aimed to only produce profits of five per cent cent at its retail arm, a figure he considered a “fair return”. “We will take steps where we can to reduce the impact of the external influences on energy bills,” he said, adding that the firm will scrap regional variations in the standing charge – reducing the figure from a £140 average to £100. “We understand that although the Labour Party’s proposed price freeze may appear superficially attractive it will not lead to lower sustainable prices going forward because it doesn’t cut the growing costs of supplying energy.
“Only 16 per cent of the bill is under our control and imposing price controls discourages investment, increases uncertainty and ultimately leads to higher prices.”
Consumer experts attacked Mr Cameron for his suggestion last week that customers should switch away from firms which increase their bills, warning that no energy firm was immune from potential hikes.
“This is proof the Prime Minister was wrong when he bluntly advised people to switch away from their current provider – in a price rise environment, that isn’t fit for purpose,” said Martin Lewis of MoneySavingExpert.com. “In fact it can be dangerous, to which anyone who last week switched from British Gas to Npower can attest.”
Energy experts have suggested customers lock themselves into a fixed price energy deal in a bid to keep prices manageable.
Ann Robinson, director of consumer policy at uSwitch.com, said: “It’s not worth waiting for the politicians – rhetoric and hot air won’t keep you warm this winter. If you want to protect yourself then the time for action is now.”