FURY AS ENERGY BILLS SOAR AGAIN
Price cap hike row as Big Six make huge profits yet millions ‘suffer in the cold’
MILLIONS of families face a “devastating” energy bill hike as critics last night warned the price cap is fuelling debt and misery.
Energy regulator Ofgem is this week expected to authorise one of the biggest price rises in a decade, driving up bills for around 15 million households by as much as £118 and above pre-cap levels.
Charities warned millions will have “no choice but to suffer in cold and dangerous homes” while the Big Six energy firms continue to rake in huge profits.
It comes just days after a cold snap saw Britain grind to a halt, with snow falling across much of the UK and temperatures in many regions plummeting to well below freezing.
Ruth London, from Fuel Poverty Action, said: “Yet another increase in energy prices
will be devastating for people struggling to keep warm. Energy companies continue to prioritise profit over people’s lives, now and for future generations.
“The price cap was supposed to bring relief but it just keeps going up, bringing increased debt and misery.
“Between 9,000-10,000 people die from cold homes in an average UK winter. Last year it was 16,000 partly due to the extreme weather in our changing climate.
“This also forces up food prices by disrupting agriculture, so many people are hungry as well as cold.
“Oil and gas prices are rising worldwide but the Government has slashed support for renewable energy and insulation.
“To save lives, now and in the future, both must be restored.”
Adam Scorer, chief executive of charity National Energy Action, said: “The recent freezing weather, coupled with the likely energy company responses to the higher caps, will have a hugely damaging impact on the most vulnerable in our society.
“Whilst Ofgem’s caps are required to reflect the underlying costs of supplying energy, higher prices will inevitably pile yet more pressure on the millions who have no choice but to suffer in cold and dangerous homes.”
He added: “Last winter, cold homes contributed to record levels of excess winter deaths and chronic ill health.
“We estimate more than 10,000 needless deaths were due to vulnerable people, often struggling with existing illhealth, being unable to heat their homes adequately, if at all.
“Many others are adopting unsafe coping strategies which create huge pressures and needless increased costs for our stretched health and social care services.”
National Energy Action warned some people try to warm their homes using ovens or candles while others close curtains or put newspapers over windows to hold heat in.
On Thursday, Ofgem is expected to allow energy companies to increase prices from April – just months after the cap forced suppliers to cut their tariffs by an average £76. When it came into force in January the cap on default tariffs was set at £1,137 per year for dual fuel bills. Experts now expect this to rise to around £1,240. The Government ordered Ofgem to apply a price cap to all default tariffs after the Competition and Markets Authority found major suppliers were able to overcharge millions of people.
But Deepa Venkateswaran, of Bernstein Research, predicted most standard tariffs will be more expensive than before the cap came in. Peter Tutton, head of policy at Step-Change Debt Charity said: “In the first half of 2018, just under 15 per cent of our new clients were behind on either a gas or electricity bill, a figure which is even higher among our clients in vulnerable situations.
“Against a backdrop of rising energy prices, we welcomed the energy price cap as a step in the right direction.
“However if the price cap increases, questions arise about its effectiveness. If firms are withdrawing their cheapest options, or raising prices for those most at risk of financial difficulty, then wider action is likely to be needed.
“We would call on the government and energy firms to work together to look at how they can help people meet the costs of energy bills, particularly those who have irregular or fluctuating incomes.”
Alex Neill, Which? managing director of Home Services, said: “This is going to be a bitter blow for people who thought that the price cap would stop their bills from rising. Energy customers now have
two months to switch and secure a better deal before the new cap comes into effect.
“While there are fewer cheap deals on the market than a year ago, by switching today you could choose better customer service and potentially save more than a hundred-and-fifty pounds.”
Ofgem calculates the cap using a formula that includes wholesale gas prices, energy suppliers’ network costs and costs of government policies, such as renewable power subsidies.
The regulator’s director, Rob Salter-Church, admitted: “No one wants to see price rises and we recognise the increase we expect to see is going to be challenging for some customers.
“But we can’t control global wholesale costs. “What we can do is ensure that we have removed the opportunity to increase prices by more than would be justified.”
It comes just weeks after npower chief executive Paul Coffey blamed the price cap on falling profits.
He said: “The retail energy market is incredibly tough.
“Ofgem forecasts that five of the big six energy companies will make a loss or less than normal profits this year owing to the implementation of the price cap.
“And with several recent failures of new energy suppliers, it is clear that many have been pricing at levels that are not sustainable.”
Steven Day, co-founder of green energy firm Pure Planet, said the cap should not be used as an excuse to hike prices to match or fall just below it.
But SSE, one of the “Big Six”, said that wholesale prices had climbed.
SSE Energy co-head Stephen Forbes said: “Faced with the option of selling energy at a loss, breaking even, or making a small profit margin, any responsible and sustainably run business will choose to price appropriately to recover costs.”
Energy UK, which represents suppliers in the UK, said it was not willing to speculate ahead of the announcement on Thursday.