17 Oct 2013

Consumers are being ‘robbed’ by energy companies – minister

Energy Minister Greg Barker tells Channel 4 News that consumers are being “robbed” by energy companies, as British Gas announces a 9 per cent bills hike, but insists the government has acted to help.

Responding to Jon Snow’s statement that consumers are being robbed, Mr Barker said: “Absolutely”. He was then grilled on why the government isn’t doing anything about it. Mr Barker said the government had made it “easier” to penalise the “big six”, by switching energy companies.

He was debating the issue with Shadow Energy Minister Caroline Flint (see debate, above).

British Gas said on Thursday that it was raising electricity prices by 10.4 per cent and gas prices by 8.4 per cent from 23 November 2013.

We are pushing competition and I would urge customers of British Gas who are unhappy to change their supplier. Ed Davey

The energy giant, which earlier this year announced an 11 per cent increase in profits to £600m, said the price increase was so that it could pay for the costs of government policies designed to make energy more efficient, upgrading the national grid, and because the price of energy remains volatile.

David Cameron told BBC Sussex radio: “I think it is a very disappointing announcement by British Gas. I think there are things we can do. We are intervening because we are legislating to say these companies have to put their customers on to the lowest tariff.

“I think a lot of customers find it utterly baffling how many tariffs they have.

“But there is something everyone can do, which is look to switch their electricity or gas bill from one supplier to another. On average, this can help people save sometimes as much as £200 on their bill.

“So I would encourage customers who are not happy with the service they’re getting, are not happy with the prices, to go to the switching sites online and see whether they can get a better deal.”

Need for reform

There was a hostile reaction from the business sector too. In a statement, John Allan, the national chairman of the Federation of Small Businesses (FSB) said:

“Today’s British Gas increase at three times the rate of inflation is a disgrace… More than 40 per cent of small businesses are with British Gas and energy price rises are going to make the cost of doing business even higher.”

Calling for reform of the sector, Mr Allan pointed out that changing supplier was not an easy option for businesses:

“Unlike households, small firms have to operate in a business energy market where prices aren’t even put into the public domain. The business energy market is in desperate need of reform and we want to see radical measure put in place to increase transparency in the market and allow small firms to switch to more competitive energy deals with ease”.

‘Change your supplier’

The Prime Minister’s comments followed anger on both sides of the Commons earlier on Thursday. Responding to a question from Caroline Flint, Energy Secretary Ed Davey said:

“It’s extremely disappointing news for British Gas customers. British Gas will need to justify their decision openly and transparently to bill payers.

“British Gas was the only company not to meet its targets under the previous obligation to make its customers’ homes more energy efficient. That left more homes cold and their customers paying over the odds.

“British Gas has form in failing to meet its targets, the last ones set by Labour. I hope you can join with me in making sure British Gas is more transparent about its costs.

“We are pushing competition and I would urge customers of British Gas who are unhappy to change their supplier.”

Energy freeze

Ms Flint, the shadow energy secretary, said: “This is the company that, with Centrica, has passed on the highest share of its profits to its shareholders while at the same time making the least amount of investments into what we need to ensure our energy security in the future.

“Two years ago the accountancy firm BDO warned the big six energy companies could be under reporting their profits, and they recommended tighter rules. But the government and Ofgem failed to act.

“We back the new rules and so did a recent select committee report but, in their response, all the government could say was ‘government is not in a position to comment’.

“Why won’t you stand up for consumers, support Labour’s price freeze and make the energy companies tell us exactly how much money they are earning?”

At the Labour Party annual conference this year, Ed Miliband promised a two-year energy price freeze if his party is elected.

Ms Flint added that if companies “colluded” to increase their prices before such a freeze came into effect, “we will take action.”