Profits up at npower after energy bills hike

Less than four months after raising customers’ energy bills, npower has announced a significant rise in its operating profits in the UK.

The energy supplier’s parent company, RWE, has reported a 10% increase in group earnings before interest, taxes, depreciation and amortisation for 2012, as well as a 25% increase in its UK operating results.

The news is likely to confuse customers who were informed that the price hikes implemented by the company late last year were necessary.

From November 26th, the energy company raised its gas prices by 8.8% and the cost of electricity by 9.1%, which pushed the average customer’s dual fuel bill from £1,244 to £1,352 a year – a rise of £108.

Necessary increases

npower said the costs of new statutory schemes, increases in distribution charges and the price of gas for the coming winter were all being driven up by external factors such as government policy.

At the time,Paul Massara, Chief Commercial Officer at the company, commented: “Although we have managed to smooth out the worst fluctuations and protect our customers for as long as we can, we are now having to pass on some of these costs.”

“We support moves to reduce CO2 emissions, but new government schemes will mean that energy bills will rise. We must make sure that they provide value for money and that people understand how they will be affected.”

However, the extent of npower’s profit rise is likely to raise eyebrows among the consumers who were affected by energy bill hikes.

Consumer questions

According to Ann Robinson, Director of Consumer Policy at uSwitch.com, npower will need to answer questions from customers asking why their energy bills were raised in the first place.

“It’s a valid question and npower customers deserve a valid answer, especially those who were forced to go cold this winter for fear of the cost of heating their home,” she explained.

The right course of action will be for npower to help UK consumers by cutting its prices again, Ms Robinson said.

While being strong and financially secure is essential to the existence of the energy market, this is only one factor in a bigger picture which needs to strike a balance between energy companies posting healthy profits and people being forced to “go cold”.

“Investing in the UK is hugely welcome, but so is taking every step possible to help keep its citizens warm. In light of today’s announcement we would urge npower to cut its prices again,” Ms Robinson added.

Over the past decade, the average annual household energy bill for npower customers has almost trebled – from £521 in January 2004 to £1,352 in January this year.

Helping yourself

With no immediate price reduction on the horizon, customers can help themselves by using less energy, making their homes more energy efficient and paying less for what they do use by moving to a more competitive plan, Ms Robinson explained.

Currently, there is almost £250 difference between the cheapest and most expensive tariffs on the market, based on a medium user customer using 3,300 kWh of electricity and 16,500 kWh of gas.

Under E.ON’s standard cash and cheque price, customers pay £1,370 a year on average, while SSE’s Discount Energy Bonus with paperless billing costs £1,134 a year – potentially saving people £236.

Ms Robinson elaborated: “Households can easily achieve a valuable saving just by moving to dual fuel, paying by direct debit and signing up to a competitively priced deal.”