Energy bills could rise by 40%, suppliers warn

Published 26th Jun 2008

Senior executives from Britain's leading energy companies yesterday warned householders to prepare for further sharp rises in gas and electricity bills.

They told the Commons business and enterprise committee that rising global energy costs were increasing the pressure on companies, and refused to rule out rises of up to 40% in household bills. The average combined fuel bill for gas and electricity has already risen 15% this year to almost £1,050, according to the consumer watchdog, Energy Watch.

Paul Golby, chief executive of E.ON UK, told the committee: "We are facing a seismic shift in [energy] commodity prices. It is not difficult to see the pressure is upwards."

At a time when transport, fuel and food prices are also rising, another big increase in energy bills would push up inflation, and damage the government's hopes of keeping public and private sector pay under control. Local government workers in England, Wales and Northern Ireland have already voted this week to strike over pay.

The business and enterprise committee and the energy regulator, Ofgem, are conducting separate inquiries into the energy market in the UK in the wake of the last round of price increases.

Yesterday Sam Laidlaw, chief executive of Centrica, parent of Britain's biggest residential energy supplier, British Gas, said: "We are buying gas at £1 a therm. It is clear that at some point ... gas prices are going to have to go up."

Ian Marchant, chief executive of Scottish and Southern Energy, took a similar view. Asked whether a 40% increase was on the way, he told the committee that looking at energy companies' input costs - what they paid for gas, oil and coal - it was not difficult to come up with a 40% figure. He said that "unless something dramatic happens" prices would have to go up significantly.

Centrica made a £1.2bn profit after tax last year and Laidlaw was asked if public perception of "fat cat" earnings was fair.

"I don't think it's fair," he said. "Over the last four years our margins have been 3.6%. 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. Over 25% of our power generation will need to be replaced over the next 10 years."

The companies have agreed to set aside £50m this year to help alleviate fuel poverty, defined as households which spend more than 10% of their income on energy. Help the Aged and Age Concern are calling on suppliers to give people over the age of 70 a £50 rebate this winter.

Source: ' Guardian '

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