Page last updated at 15:06 GMT, Wednesday, 11 February 2009

Energy prices 'will be cut soon'

Gas flame
Energy firms have come under pressure to cut prices

Executives from major energy firms yet to cut prices in 2009 have said they are "optimistic" that gas and electricity bills will fall soon.

But senior figures from EDF Energy, E.On and Scottish Power did not tell MPs when such moves would be made, and Npower was non-committal on cuts.

British Gas and Scottish and Southern Energy (SSE) have already trimmed bills for some of their customers.

However, further cuts may not be forthcoming, one executive warned.

Wholesale energy prices for summer 2010 are about 10% higher than they are now, SSE's chief executive Ian Marchant told the Energy and Climate Change Committee.

"I'm concerned that if the wholesale price increases, we might see an increase," he said.

"I would have expected us to see another round of decreases [in energy bills] later this year or early next year, but objective analysis suggests that this might not happen."

Consumer groups said the news was a "big blow" to customers already struggling with bills.

'Low profits'

Soaring wholesale energy prices have pushed bills to record levels.

But energy bosses told the Energy and Climate Change Committee that while wholesale prices were 75% higher than February 2007, energy bills had risen by 30% that time.

Nick Horler, chief executive of Scottish Power, said the pricing of energy was a "positive story" and that his firm and others were helping UK customers.

While some European customers faced bills based on the wholesale price of recent months, Scottish Power used its "size and strength" to buy energy in advance to "protect our customers from a volatile market", he said.

Scottish and Southern Energy has said that from the end of next month, its average prices for electricity customers will fall by 9% and average gas bills will be trimmed by 4% - the first price cut since March 2007.

SSE's Mr Marchant told MPs he had "no idea" why many of his rivals were yet to cut prices.

"It's the two British-listed companies who have made cuts this year. I don't know whether this is significant but it's an interesting question," he said.

We don't want to lose customers and therefore we are looking to move prices soon
Nick Horler, Scottish Power

"Part of me hopes that they do not reduce prices because I can win customers - but that's not the right thing for the UK, so I hope they get off their backsides and do something."

British Gas is to cut gas bills by 10% from 19 February - which it said would cut the average "dual fuel" customer's bill by 66.

Chief executive Phil Bentley insisted that there was no huge profiteering by his company, saying that after tax, the firm made a profit of about 2 for every 100 of a domestic bill.

'Very optimistic'

Scottish Power's Mr Horler said he was "very well aware that two of our largest competitors have set dates from which decreases will take place".

"We don't want to lose customers and therefore we are looking to move soon," he added.

And commercial director of EDF Energy, Martin Lawrence, said is firm was "actively looking at prices" and expected price moves "soon".

E.On commercial director Jim MacDonald said he was "very optimistic" about prices being reduced.

However, Npower company secretary Guy Johnson was less clear about the prospect of similar cuts in standard pricing.

Mr Johnson stressed his company had invested heavily in energy efficiency and introduced lower prices for more vulnerable customers.

"We've seen coming through in 2008, maybe not in headline prices but in the way that I'm describing," he said.

Fuel poverty

The suggestion that falls in energy bills would be limited was a "big blow to consumers", said Mark Todd, director at Energyhelpline.

He estimated that five-and-a-half million people in the UK were in fuel poverty - spending 10% or more of income on heating - a level he forecast could "escalate".

"Since the New Year, calls to our help line have doubled, with customers concerned about their costs," Mr Todd said.

"Furthermore, the number of callers who are now resorting to wearing extra jumpers to stay warm has trebled. Many callers are also noting that they have turned off their heating in parts of their house to be able to pay the bills."

Bar chart shows consumer gas prices since 2003

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