Npower: ‘Draughty’ UK homes to blame for prices

Energy giant Npower has claimed bills in the UK are high because the country’s “old and draughty” houses waste so much gas and electricity.

Npower: 'Old and draughty' British homes to blame for high prices. Picture: PA
Npower: 'Old and draughty' British homes to blame for high prices. Picture: PA

Npower chief executive Paul Massara said the actual unit prices of gas and electricity in the UK are among the lowest in Europe - but bills are high “because British houses waste so much energy”.

In the supplier’s second “Energy Explained” report, Mr Massara said: “If we can increase the efficiency of the UK’s old and draughty housing, we can ensure that annual energy bills are some of the lowest too.”

Sign up to our daily newsletter

He warned that the cost of upgrading the nation’s energy infrastructure is set to increase bills unless households can take action through efficiency measures.

And the report claims that at least 16 different policy and regulatory costs will have a direct impact on energy bills by 2020.

Npower announced a 10% average bill increase in the latest round of price rises late last year, affecting about 3.1 million customers, but has said that it will reduce bills as a result of a shake-up of Government green levies

Mr Massara said: “At times during the debate on energy, facts have been in short supply, but we urgently need to dispel some myths to restore trust in the energy industry.

“In total there are over 140 companies involved in the production, generation, trading, delivery and supply of energy in the UK, all of whom influence the price we pay as consumers for the energy we all use.

“Suppliers control less than 20% of a bill and I want to shine a light on all the different aspects of energy, particularly to reassure my customers that there is no hidden profit. We made a 3.2% margin in our retail business in the first nine months of 2013.

“Over the same period our power stations were struggling to recoup the hundreds of millions of pounds in investment required to build them, and made a loss of £59 million.

“In 2013 we traded energy with around 80 other companies through open market exchanges. The actual unit price of energy in the UK is one of the lowest in Europe but bills are high because British houses waste so much energy.

“If we can increase the efficiency of the UK’s old and draughty housing, we can ensure that annual energy bills are some of the lowest too.”

In its first report last year, Npower predicted average household bills would rise by £240 to £1,487 by 2020, primarily because of “unprecedented investment in new infrastructure and the cost of improving energy efficiency in people’s homes”.

It also claims that network charges will rise from 2015 to 2020.

But regulator Ofgem disputed this, saying that it sets the network charges and they are set to remain flat over that time.

An Ofgem spokesman said: “We welcome Npower’s effort to inform the energy debate, however their data on network costs is incorrect and misleading. We offered to help Npower improve the accuracy of their numbers for network charges and it is disappointing that they did not engage fully with us until after the document had been circulated.

“Ofgem directly regulates the money that network companies can earn through charges. Given this level of certainty we can see that after 2014 network costs per household are expected to remain broadly flat in real terms. It is unclear how Npower can state with any authority otherwise.”

A Department of Energy and Climate Change spokeswoman said: “The Government has acted to reduce the cost of social and environmental programmes on bills, which should save bill payers around £50. We expect energy companies to be clear with their customers how and when they will be passing these savings on.

“We have introduced more competition and transparency in the market to keep prices down and force energy companies to be honest about the profits they are making. Ofgem will be presenting its findings on the state of the energy market in March and we will be consulting on new criminal sanctions to strengthen the powers of the regulator in cases of energy market manipulation.”

Decc added: “Npower’s analysis is incorrect on so many levels.

“Government estimates that the impact of our social and environmental programmes will in fact lower energy bills compared to what they would be in the absence of our policies, by as much as £166 in 2020.

“A number of the policies listed by Npower don’t have any impact on household energy bills, including the Renewable Heat Incentive, Climate Change Levy and the Carbon Reduction Commitment.”