E.On hiked bills on day prices it pays hit new low

Wholesale gas prices had fallen to their lowest level of the year on the day that energy company E.On announced its latest hike in bills.

E.On, which has about five million customers in the UK, became the latest of the big six energy suppliers to increase its bills when it announced that prices for gas and electricity would rise by 18.1 per cent and 11.4 per cent respectively from 13 September.

But when German-owned E.On made the announcement on Friday, wholesale day-ahead gas prices had dropped to their lowest point of the year, at 49.9p per therm, and electricity prices sunk to their lowest point two days previously, at 45.20 per megawatt-hour.

The supplier followed British Gas, ScottishPower and Scottish & Southern Energy in announcing price rises in recent weeks, which the industry has blamed on a 30 per cent rise in wholesale costs since last winter.

There have been repeated calls for the sector to be referred to the Competition Commission amid allegations of unfair rises.

A series of events created a "perfect storm" for energy prices earlier in the year, after the Japanese earthquake and tsunami put nuclear reactors out of action, unrest in the Middle East drove up energy prices, and Germany decided to exit nuclear power.

But gas has fallen by 22 per cent and electricity by 19 per cent since the March peaks amid the slowdown in the global economy.

The companies buy their wholesale gas and electricity a long time in advance but the price of buying ahead is also at five-month lows and still falling.

Omar Rahim, of analysts Energy Trader Daily, said: "The wholesale electricity and gas markets have fallen consistently since March - this is not something that has happened suddenly.

"It's ironic that on a day when suppliers are again raising their prices, gas prices are at a year low and electricity prices are also at multi-month lows."

Energy companies have recently been urging customers to fix their energy prices for the next year to shield them from further rises but if commodity prices continue to drop it could mean the opposite - that millions are locked into high tariffs.

Andrew Horstead, risk analyst at energy specialist Utilyx, added: "If wholesale prices continue to drop, the decision to put up energy prices for households is going to be a difficult PR pill to swallow."

The average E.On dual fuel bill for a customer paying with direct debit will rise by 15.2 per cent to 1,190 from next month.

E.On said almost 600,000 were unaffected by the rise, including its most vulnerable customers on WarmAssist tariffs.

It is the second price rise by E.On this year after it increased electricity tariffs by 9 per cent and gas by 3 per cent in February.

Mike O'Connor, chief executive of Consumer Focus, said."Yet another price rise will leave the average energy bill weighing in at 1,250 a year. Many consumers worry how they will afford to keep their homes warm this winter given other price rises and flat or falling incomes. Four of the big six have now raised their prices by similar amounts."Consumer Focus said measures should be implemented to increase market competition and choice of supplier.