12 Nov 2013

Energy customers treated like ‘cash cows’ – Davey

With gas and electricity bills soaring, cabinet minister Ed Davey tells the energy companies they should stop “squeezing” their customers in pursuit of higher profits.

Following EDF’s decision to raise its prices by an inflation-busting 3.9 per cent in January, Ed Davey said the energy companies had to make profits so they could invest in infrastructure.

“But those profits cannot come at the expense of the elderly, the vulnerable, and the poorest in our society. Customers are not just cash cows to be squeezed in the pursuit of a higher return for shareholders.”

Speaking at Energy UK’s London conference, the Liberal Democrat energy secretary said trust between the companies and their customers was “breaking down”.

He compared the reputation of gas and electricity suppliers to the way the banks were perceived after the financial crisis, with reference to former RBS chief executive Fred Goodwin, who was stripped of his knighthood.

“Fair or not, they look at the big suppliers and they see a reflection of the greed that consumed the banks. So this is a ‘Fred the shred’ moment for the industry.”

EDF's average price rise of 3.9 per cent is significantly lower than the increases announced by other "big six" energy suppliers.

The company said it was not passing on the growing costs of the government's green energy levies, which it argued would have added £50 to the average bill.

The increased costs are a result of higher network charges, smart metering, renewable obligations and VAT, with only £1 of the average £49 annual rise due to increased wholesale prices, which are usually blamed when bills increase.

E.ON is the only big supplier that has not confirmed its price changes, but it is believed to be planning average increases of 6.6 per cent in January.

NPower, British Gas, Scottish Power and SSE have announced average price rises of 10.2 per cent, 9.4 per cent, 8.75 per cent and 8.2 per cent respectively.

Energy UK, which represents suppliers, defended itself, but Chief Executive Angela Knight conceded that their reputation was suffering.

“We have got a problem – an image problem, a reputational problem, a trust problem,” she said. “Trust is hard to gain and it’s easy to lose.

“Energy bills have risen for well-known reasons, reasons that the industry has made quite clear.”

As well as rising wholesale prices, the increases were also down to network costs and green levies.

With Labour leader Ed Miliband turning rising energy bills into a key political battleground, Mr Davey said the government was looking at how it could reduce the impact of its policies on bills.

Prime Minister David Cameron said in October there would be a review of the energy sector and the government’s green levies.

Mr Miliband has pledged to freeze bills for 20 months if Labour wins the next election.