First energy price rise of autumn is worrying consumer group and bill payers as more Scots topple into fuel poverty, says Claire Smith
AS THE first cool breezes of the autumn begin to sweep through the streets, one of the UK’s biggest energy companies has announced a hike in prices – leading to fears other big energy companies will follow suit.
SSE – which trades as Scottish Hydro, Swalec and Southern Electric – will increase gas and electricity by 9 per cent from October 15 – a rise of £102 a year for the average consumer.
Consumer groups are now increasingly concerned about the strain fuel bills are placing on householders – with fears the latest rises could force thousands of people into fuel poverty.
The increase announced by SSE will add an extra £119 to the average standard dual fuel bill, which will increase from £1,235 to £1,354. The average yearly cost of household energy has rocketed by 140 per cent since 2004, from £522 to £1,278 today.
Although Eon – one of the big six – has pledged to freeze prices, Centrica, the biggest supplier, hinted in its annual report that the company was planning a price increase in the autumn – despite a 23 per cent increase in profits in its residential business.
Glasgow MP John Robertson said the high price of fuel was one of the most common worries of people coming to his surgeries. “This will be a disaster for a lot of people.
“If people, particularly elderly people, are deciding whether to pay their bills or to buy food then there is a very real risk to people’s lives.”
Mr Robertson said he was concerned about how complicated bills were – saying there were more than 400 different types of tariffs. He is also concerned about people who owe money to energy companies and have been forced to install meters. If they owe more than £200 they are not allowed to switch tariffs. He plans to introduce a ten minute rule bill in Parliament on 5 September to challenge energy companies who lock in customers who owe them money.
Meanwhile Richard Lloyd, of the consumers’ association Which?, said the latest price hikes showed a need for reform of the way energy companies do business: “We can’t go through another winter with people worrying about their energy bills, the government and the regulator must reform our broken energy market.”
Which? also believes tariffs need to be clearer – and is calling for the government to insist energy companies introduce a more transparent pricing system. The consumer organisation has also supported moves to introduce collective purchasing into the UK energy market – encouraging consumers to switch suppliers en masse through its Big Switch campaign.
Ian Marchant, chief executive of SSE, defended the increase, saying rising costs were behind the price rise: “Unfortunately, the increases in costs that we have seen since making this pledge can no longer be absorbed and mean that we are unable to keep prices at their current levels beyond this autumn. An increase in our prices has therefore, regrettably, become unavoidable.”
However, hard-pressed consumers are becoming increasingly impatient with price increases – particularly when they see the profits being made by energy companies.
Research from MoneySupermarket suggests one in five people now say their finances are stretched to tipping point – while a survey by incahoot shows seven out of ten people say fuel bills are their biggest financial worry.
According to the Westminster government’s figures there are now 658,000 Scots living in fuel poverty – meaning they spend more than one tenth of their income on household bills. The latest price rises could send thousands more into financial difficulties.
Dr Ros Altmann, director-general at Saga, said fuel price rises would have a disproportionately greater effect on older people – who typically spend more of their income on heating: “Inflation rates remain higher for the over-50s, reflecting in part the fact that utility prices are still much higher than a year ago – gas prices are 15.4 per cent higher, while electricity prices are 8 per cent higher.
“We know from our own research just how much of a burden energy prices are on the finances of those faced with fixed or dwindling incomes, especially older people.”
Andrew Faulk, energy expert at Consumer Focus Scotland, said the latest price hike led to very real fears about people not being able to heat their homes adequately this winter: “The price rise by SSE will be a body blow for many vulnerable households and everyone will be worried about a run of price rises. There is little evidence in the trends in wholesale prices or in the profits of companies to justify all suppliers following suit.
“It is vital that the regulator continues to scrutinise the market to make sure consumers are paying a fair price and profits are at acceptable levels.”
A Scottish Government spokesperson said: “For every 5 per cent price increase in energy prices, 42,000 households are pushed into fuel poverty. While regulating price rises such as this are beyond the Scottish Government’s control, we are urging the UK government, which is responsible for this area, to take a firmer stance with energy companies.
“Ofgem must urgently press ahead with publishing and implementing their updated proposals to protect consumers, deliver transparency on energy prices, ensure that companies treat their customers fairly and improve competition between suppliers to rein in price increases.”