Comment: Playing blame game won’t help consumers

Terry Murden. Picture: Phil Wilkinson
Terry Murden. Picture: Phil Wilkinson
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There is never a good time to raise energy prices, but doing so just a fortnight after Labour leader Ed Miliband pledged to freeze them looks a little like provocation.

Scottish Hydro-owner SSE is the first to jack up prices in this latest of what seems a never-ending round of substantial rises. A hike of more than 8 per cent is well above inflation and could indeed prove damaging to the Bank of England’s attempts at hitting its inflation target.

Consumer confidence has been showing signs of revival, but nothing much hits householders harder than higher fuel bills. According to price comparison website uSwitch, yesterday’s rise means SSE has now increased its prices four times since December 2010, taking its average dual fuel bill from £1,038 a year to £1,465 – a 41 per cent or £427 increase in less than three years.

We can expect other utilities companies to follow SSE, which blames – among other things – the higher cost of wholesale gas and the UK government’s green energy initiatives.

There is some merit in this argument as the energy companies cannot absorb these costs without them hitting investment or consumers. The costs associated with a whole raft of energy-efficiency targets are being challenged by those who believe this they are a worthy ambition, but which come at a price – in this case, a short-term leap in gas and electricity prices.

While it is in the gift of the UK government to ease back on these targets in order to spread the load on consumers, the gas market is far less easy to control.

SSE’s main point of argument is that 85 per cent of a typical energy bill is made up costs outside its control and that to blame it for the price hike is to point the finger at the wrong culprit.

Politicians are hardly likely to accept any responsibility but the plan to freeze prices is merely playing to the gallery rather than providing a satisfactory solution.

A freeze would merely affect consumers further down the line as the companies played catch-up.

A more sensible solution is for ministers to either dilute their green targets or switch some of the cost of the levy from the energy bill payer to the taxpayer, a move that SSE says would take £4 billion off the cost of fuel for consumers.

But the companies themselves are hardly without guilt and their pricing structures will be the subject of another inquiry by energy regulator Ofgem, which said it will look into the transparency of energy companies’ profits.

Postal workers face dilemma over strike

The Westminster government has been accused of undervaluing Royal Mail and, when conditional trading begins today, it looks like those critics will be proved correct.

Investors won’t worry too much about that. The share price was struck last night at the top end of the range at 330p, valuing the business at £3.3bn.

But it is likely that the shares will trade today at up to 410p, representing a 25 per cent profit, with some betting on a close of around 450p.

That will represent a tidy profit. The highest first-day trading premium in a privatisation was for the first offer of BT shares in 1984, which jumped by 35 per cent, providing a measure of how popular the Royal Mail issue has been.

It remains to be seen how it might affect sentiment among the 150,000 postal workers due to ballot on strike action. The vote closes next Wednesday, the day after full trading in the shares begins.