Energy price rises mean fuel poverty for one in six households

21 January 2008 / by Verity G
One in six families in Britain will find themselves trapped in fuel poverty after a series of price hikes from the UK's biggest fuel providers have pushed up energy costs to an average of £1000 a year.

More than four million Britons will now be struggling to pay their fuel bills and according to figures from consumer group, Energywatch, one in six households already spends more than one-tenth of its income on gas and electricity – a figure that is set to rise.

On Friday, British Gas announced that the rising wholesale gas and electricity prices – which have increased by 51 per cent and 61 per cent respectively since spring last year – are responsible for the 15 per cent hike. The move follows similar announcements by EDF Energy and npower earlier in the week and it is thought that Scottish Power, Powergen and Scottish and Southern Energy will follow suit in the coming weeks.

Speaking on Friday after the British Gas announcement, Ann Robinson, Director of Consumer Policy at Uswitch.com, said: "Today's inflation busting price hike will leave 16 million consumers wondering what this company has done to deserve their loyalty and continued custom in 2008.

"Last year, British Gas spent £53 million on advertising, convincing consumers that it had turned over a new leaf. Now it is getting back to what it does best – shoddy service, high prices and poor value for money."

The rises have angered campaigners, who say that the move is likely to increase the numbers of families that fall within the 'fuel-poverty' bracket and rather than continuously increasing costs, energy companies should be offering alternative budget "social" tariffs to vulnerable households. However, Ofgem, the energy regulator has deemed the rises fair and dismissed suggestions that fuel companies have colluded over the price hikes.

Chief Executive of Ofgem, Alistair Buchanan comments: "We have no evidence of anti-competitive behaviour. We see companies gaining and losing significant market share, record switching levels and innovative deals."

According to Ofgem, the average wholesale day-ahead prices over the month of January increased by 66 per cent in the gas market and by 64 per cent in the electricity market. In addition, Ofgem has backed the fuel companies' claims that the increases are also the result of stringent EU targets for reducing CO2 levels in an attempt to combat climate change.

However, news last week that the energy giants have been awarded a £9 billion fuel bonus by the EU Emissions Trading Scheme has further enraged campaigners and politicians.

Under the initiative, which awards 'permits' to help combat climate change gases between 2008 and 2012, energy providers are provided with money to fund the changes, yet despite the generous windfall, they have pressed ahead with the controversial price hikes, citing the additional EU costs as one of the main reasons behind the decision.

The Fuel Poverty Advisory Group have criticised the move saying the money is urgently needed for vulnerable families who are being forced to chose between heating and eating. Chairman Peter Lehmann comments: "The permits should be auctioned and the money should be recycled to help the millions of struggling families."

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