Page last updated at 15:30 GMT, Thursday, 21 August 2008 16:30 UK

Two energy firms to raise prices

Gas rings
The move comes shortly after British Gas announced a record rise in bills

Energy firms E.On and Scottish and Southern Energy are to raise gas and electricity prices by up to 29%.

E.On said it would up its gas prices by 26% and electricity bills by 16% on 22 August for domestic customers.

Scottish and Southern followed a few hours later by announcing a 29.2% increase in gas bills, with electricity tariffs up by 19.2% on 25 August.

Both blamed an increase in wholesale costs for the latest rises - the second in a year.

E.On's commercial director defends its energy price rise

Scottish and Southern said direct debit customers would see their annual dual fuel bill rise to 1,196 on average, up from 945.

Those paying by quarterly demand, or by cash, would have an average annual bill of 1,259, up from 1,006.

E.On said dual-fuel customers would see an average annual increase in their bill of 227.

The average annual bill for an E.On customer paying by monthly direct debit would be 1,194 following the latest rise, up from 967. The average for those paying in other ways would be 1,259, including discounts, the company said.

Those paying on a pre-payment meter would face an average annual bill of 1,298.

'Tough time'

Graham Bartlett, managing director of E.On's retail business, said that the company had tried to keep the increases as low as possible to protect customers.

NEW ANNUAL E.ON DUAL FUEL PRICES
Average bill paid by monthly direct debit - 1,194 - up from 967
Average for cash and quarterly demand payment - 1,259 - up from 1,031
Average pre-payment meter - 1,298 - up from 1,097
Source: E.On

"I'm very aware of the effect that today's announcement will have on our customers and I recognise that this is a very tough time for everyone," he said.

This is E.On's second price rise for domestic customers this year. In February it put up gas bills by 15% and electricity tariffs by 9.7%.

The German-owned company has 5.5 million customers in the UK.

'Energy shock'

Scottish and Southern Energy's price rises will come into force three days after E.On's increase in tariffs.

NEW ANNUAL SCOTTISH AND SOUTHERN DUAL FUEL PRICES
Average bill paid by monthly direct debit - 1,196 - up from 945
Average for cash and quarterly demand payment - 1,259 - up from 1,006
Source: Scottish and Southern Energy

"The world is experiencing an energy shock of a kind not seen since the early 1970s," said Alistair Phillips-Davies, the company's energy supply director.

"Energy suppliers have to take steps towards covering their costs and I am sorry that we cannot delay these price rises any longer."

The company, which has 8.8 million customers across the UK, said prices would have gone up more were it not for a dip in the oil price - and in turn wholesale gas prices - in recent weeks.

It added that it would not be putting up costs for consumers again in 2008.

In April, it put up electricity bills by 14.2% and lifted gas charges for domestic customers by 15.8%.

Tim Wolfenden, of price comparison website uSwitch.com, said it was only a coincidence that the two big energy companies had made their announcements on the same day.

In the latest round of price rises in July, EDF Energy put up gas prices by 22% and electricity prices by 17%. Shortly afterwards, British Gas put up gas bills by a record 35% and electricity tariffs for its customers by 9%.

Fuel poverty

Adam Scorer, of watchdog Energywatch, said that the price rises were not a surprise owing to the picture across the industry.

We are extremely concerned that the one in three pensioner households likely to be living in fuel poverty by the end of the year will feel forced to cut back on essential food or fuel
Gordon Lishman, Age Concern

"The brakes have come off the market," he told the BBC.

He said that the "good times" of self-sufficiency from the North Sea gas supply - which meant the UK's gas prices were the lowest in Europe - were over and so rising prices should be expected.

He said that consumers were waiting for the government to publish its intentions on tackling fuel poverty and for regulator Ofgem to complete its inquiry into competition in the energy market.

The number of households in fuel poverty would rise to above five million, he added.

Gordon Lishman, director general of Age Concern, said the latest rises were a "huge blow" to those struggling to pay bills and called for the introduction of fuel vouchers by the government.

"We are extremely concerned that the one in three pensioner households likely to be living in fuel poverty by the end of the year will feel forced to cut back on essential food or fuel," he said.

Investment

E.On said it was helping those on pre-payment meters. It said it was the first energy company to match the prices of pre-payment meter customers and standard customers if they used the same amount of energy.

Plug
Rising wholesale costs have been blamed for the latest price increases

The difference in the average annual price between the payment methods is due to discounts for prompt payment that are only available to standard customers.

E.On's commercial director Jim Macdonald told the BBC that the industry was spending billions in investment.

He said E.On was investing more than 200m in a gas storage scheme in Cheshire which would allow it to store gas when prices were lower in the summer and smooth out some of the volatility in wholesale gas prices.

Scottish Power and Npower have yet to raise prices this summer, although they are expected to follow suit in the coming weeks.


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