Make energy prices consumer-friendly

It did not take the energy companies long after the general election to push up prices. British Gas has raised electricity charges for more than three million customers by 12.5 per cent and it would be no great surprise if its rivals did not follow suit, given the way the market operates. Centrica, the owners, who kept prices down when competitors put them up in the spring, say it was their first rise in four years. But that is little consolation to consumers facing renewed income pressures. The average annual dual-fuel bill for British Gas will rise by £76, to £1,120, though help will be offered to more than 200,000 vulnerable customers.

During the election campaign, both major parties were committed to capping prices but the Conservatives sensibly dropped the plan from the Queen’s Speech. Instead, the energy regulator Ofgem is to explore better ways of moving customers stuck on the poorest value tariffs.

The British Gas increase has inevitably renewed demands from Labour for a price cap that the Government would be wise to resist. It is not the job of ministers or officials to determine the right price for a commodity but rather to encourage competition and allow people to make their own decisions.

But it is the Government’s job to set overall energy policy and it is here where much of the problem lies. The move away from carbon-based energy sources and the expansion of renewables and nuclear power has cost consequences, in the short term at least, with the consumer expected to pick up the tab.

So, too, has the national roll-out of digital “smart meters”. Furthermore, politicians calling for lower prices would do well to throw their weight behind fracking for shale gas, which has not even got off the ground after early promises.

There is also an unsatisfactory market at work. Customers who shop around and obtain cheaper tariffs find they are paying higher prices not long afterwards, when the special deals they have found expire. Unless they are prepared to spend time looking out for better terms, or get another company to do it for them, they will end up with a bigger bill than they should.

Perhaps the time has come for energy companies to scrap the standard variable tariffs on which they park most users and introduce a more consumerfriendly charging system.