Brits Paying 37% More for Gas and Electricity Than in 2008

Energy Firms Accused of Adding £560m to Household Bills

January 13, 2011

Guardian - British householders are facing half a billion pounds' worth of higher energy bills and could be hit by more as the price of crude soared last night towards $100 a barrel on global markets.

Domestic power price increases have already been made by British Gas and others that leave customers paying 37% more for their gas and electricity than they were in 2008, according to uSwitch, the price comparison service.

But the prospects for even higher rises increased as oil broke through $98 a barrel in response to strong demand and supply disruptions. The wholesale price of gas is strongly linked to the cost of oil.

The price of oil is also pushing the price of forecourt petrol to record levels and putting intense pressure on a government which increased fuel duties and VAT as the new year began.

David Cameron was challenged over fuel prices at prime minister's question time in the Commons yesterday and appeared to back down on a previous commitment to look at the introduction of a "fuel price stabiliser". Last week he said he was working with the Treasury on the idea.

USwitch claims that homeowners are each paying £338 or 37% more for their gas and electricity than they were in 2008, though there are big differences in the tariffs offered by the six companies that dominate the market.

While heating has been turned up in the cold winter, domestic energy users have been forced to cope with a series of price rises, the most recent one being a 9% or £42 rise for electricity and 3% or £9 rise for gas imposed by E.ON.

"This [wider industry] increase has hit 24.6 million customers, added over £560m on to our energy bills and taken the average household energy bill to £1,250," said Ann Robinson, director of consumer policy at uSwitch.com.

"It is a painful reminder that while households are attempting to rein in costs their essential bills are being pushed up, often through no fault of their own."

EDF Energy has frozen its prices until March this year but five of Britain's big six energy suppliers have increased theirs by an average of 5.4% or £65, with the typical annual household energy bill shooting up to £1,250 as a result.

This is not far short of the very high levels seen two years ago when the average household energy bill rose by 42% from £912 to £1,293 over one 12-month period. Subsequent price cuts saw it drop by 8% or £99 to £1,194, argues uSwitch.

British Gas, SSE and others blame the rise in the price of wholesale gas but energy regulator Ofgem launched a review of the pricing policy after British Gas made operating profits of £585m for the first half of 2010, up 98% on the same period in 2009.

Consumer Focus, a champion for energy users, says homeowners will remain sceptical about the reasons given for higher prices as long as power companies do not provide details about their gas-buying activities and the costs that they are absorbing.

"Consumers will feel they haven't received the benefits of low wholesale prices for the last two years but suppliers have been quick to up prices as wholesale costs have begun to rise," said Audrey Gallacher, head of energy at Consumer Focus.

Brent crude oil futures prices rose above $98 a barrel yesterday for the first time in 27 months as production shutdowns in Norway and growing global demand raised expectations of tighter supplies. Barclays Capital has predicted $100 oil before long – a very high level by historic standards – but that is still far short of the $147 spike in the summer of 2008.