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Monday
27th July 2008
French firm EDF Energy has raised its SME prices by 17 per cent for electricity and 22
per cent
for gas.
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EDF
Energy is currently undergoing takeover talks with British Energy, the UK's
nuclear generation company that is 35% owned by the government. |
British firms are expected to follow suit
over the next few weeks, with Scottish & Southern Energy and British Gas already
making it clear of their intentions to raise prices.
EDF, like BG and SSE, is citing record wholesale energy prices as
the main reason for the hikes, adding in that since it had last raised prices in
January this year, the cost of coal has increased by around 70%,
gas by 63% and
electricity by 47%.
Concerns are raised as the other major suppliers are all expected
to follow suit in the next few weeks, as Centrica, who owns British Gas, and
Scottish & Southern have both expressed a desire to raise prices in the near
future due to spiralling costs in the wholesale market.
EDF is currently in talks with British Energy over a takeover deal
that would see it take control of the UK's nuclear power stations with a view to
building more over the next 15 years. It has insisted that the price rises
are nothing to do with the plans to invest in nuclear power, and are simply
being passed from the wholesale market to the consumer.
If the merger goes through, the new company would own 20% of the
UK's generating capacity, leading to fears of even higher prices due to the
large amount of power the new company will have, especially as
new nuclear power plants are soon to be
built in the UK.
These developments feed concerns that rising wholesale prices will also
impact business energy bills.
Business tariffs tend to be negotiated on a case-by-case basis, however industry
observers have warned that firms can expect to see price rises on a similar
scale to those being experienced by domestic customers.
A spokesman for EDF said that its large business customers were locked into
longer-term contracts and would not be directly affected by the changes. But he
added that rising wholesale prices were creating upward pressure on bills right
across the market, leading to rises in the longer term.
Indeed, many were surprised by the size of the price rise, with the supplier
opting to go for around 20% now with another 10-20% to come before the end of
the year, thus avoiding a hike of 30-40% in a single jump.
SSE chief executive Ian Marchant said at the company's annual meeting that
"The extent of the energy shock with which the entire global economy is having
to contend has been well documented and its full impact on prices for
electricity in the UK has still to be felt".
"We are continuing to resist the pressure to put up prices for domestic
customers, but doing so is becoming more difficult by the day," said Mr
Marchant.
Despite these high energy prices, the company said it was on course to give
shareholders a dividend of at least 4% in 2009 and 2010.
The Perth-based company made a pre-tax profit of £1.2bn in the year to March
2008, in line with analysts' expectations.
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