BBC Home
Explore the BBC
BBC News
Launch consoleBBC NEWS CHANNEL
Last Updated: Wednesday, 8 September, 2004, 11:56 GMT 12:56 UK
Power price rises rile watchdogs
Suppliers are passing higher wholesale costs onto customers
Energy customers are being urged to switch suppliers after Npower followed the lead of rival British Gas and announced a big increase in prices.

Watchdog Energywatch and independent regulator Ofgem advised customers to shop around if their bills rise.

Npower said the cost of gas will rise by almost 12%, while the price of electricity will go up by 7.5%.

The UK's third-largest energy firm blamed higher wholesale costs, linked to surging oil prices, for the rise.

It is Npower's second price rise this year, although the company is promising it will now freeze prices until 2006.

UK consumers should not have to accept this never-ending series of huge price rises without a satisfactory explanation
Alan Asher, Energywatch

Npower's decision means an average customer can expect to pay 42 extra a year for gas and 23 extra for electricity.

A London-based family of four living in a three-bedroom house who get gas and electricity from Npower will see their net bill rise by an extra 96.98 a year.

When you take Npower's earlier rise in prices into account, that family will pay a total of 130 extra.

The latest price increase will come into force on 1 October.

Body blow

Energywatch said Npower's price increases were a blow to consumers.

"Consumers cannot afford to wait any longer for action. We are paying the price for a flawed market through our bills," said Allan Asher, chief executive of Energywatch.

"UK consumers should not have to accept this never-ending series of huge price rises without a satisfactory explanation."

How to save on energy costs
Switch suppliers to a cheaper deal
Read your meter and check that you receive accurate bills
Cut out energy waste
Get good energy efficiency advice
Pay by the cheapest method available
Source: Energywatch

The watchdog called for an investigation by a body such as the European Commission into the root causes of high wholesale gas prices. It plans to host a meeting of energy companies to look at industry issues which may be preventing them from getting cheaper wholesale supplies.

Meanwhile, industry regulator Ofgem suggested customers use the price rises as an opportunity to shop around and see if they can get a better deal.

"There are no prizes for loyalty in the energy market," an Ofgem spokesman said.

Oil knock-on

Wholesale gas prices have risen nearly 40% in the past year, partly as a result of higher crude oil prices.

This in turn has affected the cost of electricity, as 40% of the UK's electricity is produced by gas-fired power stations.

We realise that any increase is unwelcome and has implications for households trying to manage their bills, so our new rates will be frozen until 2006
David Threlfall, Npower

There are six major gas and electricity suppliers and a range of smaller suppliers which disgruntled British Gas and Npower customers could switch to.

However, Powergen has already increased its prices twice this year and the other gas and electricity suppliers are expected to follow suit.

Npower, which has about six million customers across the UK, says it does expect to lose business but hopes to keep customers with its guarantee of no more rises until January 2006.

"We realise that any increase is unwelcome and has implications for households trying to manage their bills, so our new rates will be frozen until 2006, allowing all our customers to budget with confidence," said David Threlfall, chief executive of Npower retail.

Drying up

Last month, British Gas also reacted to higher wholesale prices by announcing that household gas bills would rise by 12.4% and electricity by 9.4% from 20 September.

Centrica, which owns British Gas, warned that depletion of the North Sea and Irish Sea gas reserves is taking its toll, forcing companies to import more supplies.

And with the added factor of record oil prices, costs are spiralling even more.

Once a net exporter of gas and oil, the UK is on the brink of becoming a net importer in the next year or two for the first time since North Sea oil was discovered in the 1970s, according to the Energy Information Centre (EIC).

By 2015, it is forecast that 75% of the UK's gas requirements will need to be imported.

British Gas rise 'is a body blow'
25 Aug 04  |  Business
Why are power prices on the rise?
24 Aug 04  |  Business
British Gas puts up energy prices
24 Aug 04  |  Business
UK homes face energy bill squeeze
18 Aug 04  |  Business
Npower puts up consumer prices
09 Jan 04  |  Business

The BBC is not responsible for the content of external internet sites


News Front Page | World | UK | England | Northern Ireland | Scotland | Wales | Politics
Business | Entertainment | Science/Nature | Technology | Health | Education
Have Your Say | Magazine | In Pictures | Week at a Glance | Country Profiles | In Depth | Programmes
Americas Africa Europe Middle East South Asia Asia Pacific