SCOTTISH Gas customers in the north of Scotland will face the UK’s biggest increases, after the utilities giant hiked its charges.
The firm, part of British Gas, is the second of the Big Six energy companies to raise its bills – despite promising just five months ago it would put its billions of pounds in profits towards keeping prices low for customers.
Prime Minister David Cameron led calls from politicians for customers to switch from companies that have increased prices, such as British Gas and Perth-based SSE, which last week added an extra 8.2 per cent to its average bill.
Labour leader Ed Miliband, who has promised a temporary freeze on prices if his party wins the next general election, said the increase showed there was “a real urgency” for action.
British Gas said its average dual-fuel bill would rise by 9.2 per cent – an increase of £131 for the typical household – but Scottish customers will be hit harder.
Regional variations in network costs that it is obliged to pay to transmission companies in different parts of Britain mean those in southern and central Scotland will see a 9.5 per cent rise, while those in the north face an 11.2 per cent increase. Scotland’s electricity transmission network is split between Scottish Hydro in the north and ScottishPower in central and southern Scotland.
In May, British Gas’s parent company, Centrica, said it would protect customers from price rises for as long as possible, by pumping extra profits generated during the cold winter back into the business. The firm posted a £1.56 billion profit in June.
Tom Lyon, energy expert at uSwitch.com, said: “Today’s price hike will be seen by many as a broken promise. British Gas customers have had the rug pulled from under their feet and I suspect that many will be feeling let down and betrayed.”
Some 7.8 million customers – including 800,000 in Scotland – will be affected by the rise. The average household dual-fuel bill will go up from £1,340 to £1,471 a year – making British Gas more expensive than SSE.
Energy Secretary Ed Davey said consumers unhappy at the company’s decision to raise electricity prices by 10.4 per cent and gas by 8.4 per cent should look elsewhere, telling MPs many other suppliers were offering lower prices.
The Prime Minister’s spokesman indicated the government would look at ways to make it easier for consumers to switch suppliers.
He said: “Over recent years, it has, through the internet and stuff, it has got easier. But if there are more ways in which that can be looked at, of course we would look at those.”
He said Mr Cameron’s view was that “if customers aren’t happy with the service they are getting, not happy with the prices they are getting, he would encourage them to go to the switching sites and see if they can get a better deal”.
But Martin Lewis, the man who set up MoneySavingExpert.com, said households should not immediately switch to the cheapest deal on offer.
“Now big energy beast British Gas has put its prices up by even more than SSE, it’s confirmed that this price hike round is big, and is nasty,” he said.
“The most important thing people need to know is, don’t just do a comparison to ditch and switch. You’ll simply end up going to the cheapest now, which will inevitably put prices up later. Instead, the smart move is to lock into a cheap fixed-rate deal that guarantees no price hikes.”
Jeremy Cryer, energy spokesman for GoCompare, agreed. “A good signal for when it’s best to fix is when good deals and tariffs start disappearing from the market – which they have been in recent weeks,” he said. “And as winter approaches, it’s likely that the wholesale price will rise again as demand for gas and electricity increases, so, again, that could be a good time to fix.”
Norman Kerr, director of fuel poverty charity Energy Action Scotland, said: “Families now find that they are making often stark choices of a hot meal or putting the heating on. This is not a choice that anyone should have to make in this day and age.”
Politicians and consumer groups have called for further reform of the energy market, including the potential splitting up of the domestic supply and power generation sectors.
Richard Lloyd: For the sake of poor British consumer, let’s fix this broken system
Millions of hard-pressed consumers will have been left reeling from news of this latest blow to their finances. Off the back of price hikes and profit announcements, consumers now have about the same lack of distrust in energy companies that has just previously been reserved for the banks.
In recent years, we’ve seen a domino effect where all the major companies follow suit. So far, British Gas has followed hot on the heels of SSE’s price rise last week.
This came a year to the day that the Prime Minister made his pledge to help consumers with their energy bills.
So, a year on from his promise, is the energy market working any better for consumers?
Energy Secretary Ed Davey said people should seek better deals elsewhere on the market. But we already know switching rates are low, with around three-quarters of people on some of the most expensive standard tariffs. In fact, consumers are losing out to the tune of £3.9 billion a year from not being on the best deals. But people struggle to navigate their way around the market because they are bamboozled by the vast array of deals out there. Even if they do switch, it can be a difficult and slow process.
Consumers need to be able to simply and swiftly switch to better deals and force the energy companies to fight over their custom. That’s why we want to see simpler pricing, so that anyone can spot the best price. Ofgem’s plans for reform, while a step in the right direction, will fall short of delivering this.
Meanwhile, British Gas and others have blamed rising prices on the cost of wholesale energy and the cost of the government’s green subsidies and policies. Wholesale prices make up about half of our energy bills, yet it’s difficult to know whether the price we are paying is a fair one, due to the structure of the biggest energy companies and the murky way energy is bought and sold on the wholesale markets. So we must break the stranglehold of these vertically integrated energy companies by separating domestic supply from generation businesses.
It’s true the cost of government policy is an increasing part of our bill – around 10 per cent and rising. The problem with these costs is the worrying lack of scrutiny about whether they’re being delivered at the lowest possible cost for consumers.
We need to invest in new generation. We need to make our homes more energy efficient. But not at any cost.So the government must do its utmost to keep these costs in check and systematically look at each programme to see if it could be delivered more efficiently and cost effectively. That’s why we want the National Audit Office to be able to investigate the cost of all government policies on our bills.
The truth is the energy market isn’t working any better; in fact, it is fundamentally failing consumers. We need politicians of all parties to come together to find practical ways to make this market more competitive, and quickly.
• Richard Lloyd is chief executive of Which?