'Big Six' confirm further steep price increases for gas and electricity

25 June 2008 / by Daniela Gieseler
In a hearing of the Commons Business and Enterprise Select Committee the six leading energy providers confirmed yesterday that customers will have to prepare for further steep rises in their gas and electricity bills.

Senior representatives from energy suppliers such as Centrica, E.ON UK and Scottish and Southern Energy stated that soaring wholesale gas prices, which are linked to oil prices, were forcing them to pass on the cost to the consumer. They refused to rule out a rise of up to 40 per cent in the retail price this year.

"We are buying gas at £1 a therm and after distribution und transportation costs selling it at 60p a therm," Sam Laidlaw, chief executive of British Gas' parent company Centrica, said in the hearing. "It is clear at current prices… at some point in the future gas prices are going to have to move up."

"We are facing a seismic shift in commodity prices. It is not difficult to see the pressure is upwards," Paul Golby, CEO of E.ON UK, added.

Paul Marchant, CEO of Scottish and Southern Energy took a similar view, saying prices were set to rise "unless something dramatic happens". He claimed his company was currently losing money because wholesale prices had risen so far over retail prices.

Centrica with its newly announced profits of £1.2billion came particularly under fire, but Mr Laidlaw defended his company against accusations of "fat cat earnings": "I don't think it's fair. We need to have a margin, we need to make a return because we need to invest in new sources of gas for the UK and to invest in replacing power generation."

According to consumer watchdog EnergyWatch, the average fuel bill for gas and electricity has already risen by 15 per cent this year to an average of more than £1,000 per household.

As transport, fuel and food prices are all on the rise, a further hike in gas and electricity prices would entail a danger of increasing inflation, and put even more strain on struggling householders.

The Committee heard evidence from smaller energy firms which accused the big six companies, which both generate and sell power, of excluding them by not making the energy they generated available on the market.

Although the six companies refuted the accusation, it is becoming obvious that the lack of competition in the energy market does neither help the smaller companies nor the consumer.

Graham Paul of independent power supplier Electricity4Business said: "Despite deregulation, competition has declined over the years and been thwarted by increasing consolidation and vertical integration."

"This effectively sees the largest energy companies in Britain wielding an unprecedented level of control over the market as producers as well as retailers."

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