uSwitch gas & electricity news January 2008

British Gas, the UK's largest energy supplier, has today announced a price increase of 15% on both its standard gas and electricity plans, effective immediately.

This increase could see British Gas customers paying £139 more on their energy bills on average – an additional £85 for gas and £54 for electricity.

Ann Robinson, Director of Consumer Policy at uSwitch.com, said:

“Today's price hike will leave 16 million consumers wondering what this company has done to deserve their loyalty and continued custom in 2008. Last year, British Gas spent £53 million on advertising, convincing consumers that it had turned over a new leaf. Now it is getting back to what it does best – shoddy service, high prices and poor value for money.

“Today's increase is the thin end of a wedge – British Gas has left the door open for a change in pricing policy that will see consumers paying different prices for gas based on where they live in the UK. If this ‘postcode lottery’ policy is adopted across the board by all suppliers then previous estimates that price rises would add an extra 15% or £150 onto household bills in 2008 could fall short.

“British Gas customers cannot afford to hang around. Unless they are already on a competitive online deal they should move to a cheaper plan today to protect their household from the impact of higher energy bills.”

Citing soaring costs and increased environmental obligations, EDF Energy today announced an increase in its gas and electricity prices - following in the footsteps of npower who raised their prices on January 5.

Electricity will rise by 7.9% and gas by 12.9%, effective from Friday January 18, 2008. The average household bill for a dual fuel EDF Energy customer will now go up from £907 to £1,007 – £36 more expensive than when prices were at a peak last year.

EDF Energy have linked the price increase to three key factors:

1. Rise in the wholesale price of energy
2. Rise in the distribution costs of transporting and metering energy
3. Cost increases from meeting environmental obligations (including a major expansion of the Government’s energy efficiency scheme)

Ann Robinson, Director of Consumer Policy at uSwitch.com, comments: .

“Consumers are again being asked to accept an inflation busting price hike at face value without the courtesy of a detailed, clear and logical explanation. The industry has yet to provide any degree of transparency about how household energy bills are calculated and what costs consumers should legitimately be asked to shoulder. Companies are gambling on the vast majority of customers sticking with them regardless of how much they end up paying for their energy. This is blatant cashing in on loyalty.

“All people really want to know is whether they are being treated fairly or not but, with household energy bills heading back up over £1,000, they cannot afford to hang about waiting for an answer. Consumers must take action now and move to a cheaper energy deal if they want to protect their household from the impact of higher energy bills. By not switching consumers could waste savings of up to £325.”

The UK's fourth largest energy supplier, npower, has rung in the new year with a price rise for their domestic customers.

From January 5, npower will be charging an extra 17.2% or £92 on standard gas plans and an extra 12.7% or £48 on standard electricity plans.

The price rise has pushed npower up the league table to become the most expensive supplier on the market – on average npower is now 15% more expensive than its competitors.

The new year price hike also wipes out the 12% or £121 price cut instigated in 2007 and means that customers only enjoyed lower prices for 8 months, mainly during the summer period when energy usage is lower anyway.

Tim Wolfenden, Head of Home Services at uSwitch.com said, “The prospect of being able to raise prices has had suppliers champing at the bit, so it was always just a matter of time before one of them made the move. By announcing price increases today, npower has given the other suppliers the green flag they’ve been waiting for. The coast is now clear for a general price hike and energy bills can be expected to top £1,000 again - consumers are going to be in for a rough ride this year.”

npower have attributed the price rise to an increase in wholesale energy costs, however, the size of the increase means the average household bill for a standard dual fuel npower customer will now go up from £908 to £1,047– £18 more expensive than when prices were at a peak last year.

“Customers have to switch now to reduce the impact of higher energy bills on their household,” said Wolfenden. “By not switching, consumers could waste over £2.3 billion in total or £334 each. Those who have never switched before and are sitting on an uncompetitive standard plan have the most to gain and should switch straight away.”

* Average bill sizes based on a medium user consuming 3,300kWh electricity and 20,500kWh gas, on standard plans paying on receipt of bill. Bill sizes averaged across all regions. Customer numbers calculated from research carried out by YouGov, 6-13th December 2007 among 6,918 adults who are involved in decision making regarding their gas and electricity supplier(s).