EDF Energy and British Gas are the latest of the major UK energy suppliers to
have raised their domestic electricity and gas prices this January.
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The
first price rises of the year have been around 10% for electricity and 15% on
gas |
The latest energy price rises come after npower a British household and
business electricity and gas firm owned by Germany's RWE, announced big
increases in its household-energy tariffs on 4th January.
On January 4th
electricity prices for npower's customers rose by an average of 12.7%;
natural gas prices by 17.2%.
The averages disguised a much wider range - rises for some customers were as
high as 27%, with distribution costs being blamed as it costs more to transport
gas to some parts of the country. Other suppliers have now announced price hikes
of their own:
British Gas has announced a massive 15 per cent increase in its
gas and electricity prices,
topping recent hikes from npower and EDF Energy.
A statement from Centrica, which owns British Gas, said that since it last
increased its prices in late 2006 – by 12 per cent – wholesale energy prices had
risen sharply. The increases announced by the company will affect 11 million
customers.
Last week, EDF also raised its
gas and electricity prices,
but not by as much – by 12.9 and 7.9 per cent respectively for 5.5 million
customers.
The energy firms offer a simple explanation: gas is expensive because oil is
expensive, driven by production difficulties, dwindling reserves and insatiable
demand from the rapidly growing economies of India and China. Electricity
prices, in turn, follow gas prices, because about 40% of Britain's power plants
are gas-fired.
Add in the rising cost of meeting energy-efficiency targets, and the
increasing proportion of energy that must by law come from expensive renewable
sources, and price rises are inevitable.
But high oil prices may not be the whole story.
Allan Asher, the head of Energywatch, a consumer watchdog, argues that the real
problem is the malfunctioning of Britain's vaunted liberalised energy markets.
He points out that the number of suppliers has dwindled from more than 20 a
decade ago to just six now, and that today's firms are vertically integrated to
a great degree. Opaque markets and jealous incumbents make entering the domestic
energy business difficult, and continental Europe's fondness for long-term
contracts makes it hard for suppliers there to respond to price signals
elsewhere. The result is volatility: even when British prices reach eye-watering
levels (as happened in each of the previous two winters), gas imports do not
increase to match, leading to factory closures and, in 2006, fears that
residential customers might be cut off too.
For many years ministers have assured the public that Britain's markets are
working well, pointing to high levels of switching by customers and arguing that
price is not the only measure of competitive performance. But on January 7th
Alistair Darling, the chancellor, asked for a meeting with Ofgem, the energy
regulator, to discuss whether consumer energy prices (which have risen steadily
since 2003) have been responding properly to wholesale prices.
Regardless of Mr Darling's concern, other official policies mean that energy
prices are likely to remain high. The government is keen on expanding renewable
energy and on building a new generation
of nuclear-power plants to cut carbon emissions. But windmills and atomic
reactors are expensive, and the only way they can compete with fossil fuels is
through subsidies or higher energy prices that reflect the full cost of emitting
carbon. Either way, consumers will foot the bills.
Sources: http://www.independent.co.uk/
| http://www.economist.com/
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