18 Oct 2012

Q + A: consumer energy prices row

Channel 4 News looks at the debate over energy prices and unpicks the “combishambles” over the government’s plans to ensure energy companies help consumers to get the best deal.

Q. What is the problem?

As more strain is put on household budgets, price hikes in the cost of gas and electricity have become a, pardon the pun, hot political issue. Recently, Npower announced it will raise gas and electricity prices by 8.8 per cent and 9.1 per cent respectively following British Gas which said that price rises will add an average £80 to household fuel bills, with the average dual fuel bill will increase to £1,238.

Scottish and Southern Energy, which operates under the Swalec, Scottish Hydro and Southern Electric brands, announced a 9 per cent average increase in fuel bills, hitting about five million electricity and 3.4 million gas users. British Gas blamed rising wholesale costs for the increase in prices.

The prime minister must stick to the promise he made in parliament to legislate so energy companies have to give the lowest tariff to their customers. Richard Lloyd, Which?

There is also the issue of confusing tariffs – the varying price bands used by energy companies to charge consumers. By default, energy users are generally put on what’s called the “standard” tariff, which is almost always not the company’s cheapest rate. The consumer organisation Which? has called on companies to simplify tariffs as it says currently they are confusing and unfair.

Q. What is the government proposing to do?

That’s the question. In prime minister’s questions, David Cameron appeared to surprise his colleagues in the Department for Energy and Climate Change (Decc) by announcing the government intended to force energy companies to offer their consumers the cheapest available deal.

More on this story: Energy minister fails to confirm PM’s energy bill claim

The next day shadow energy secretary Caroline Flint accused the government of making up policy on the hoof when in response to her urgent question in the house, Energy Minister John Hayes (deputising for Ed Davey who was apparently too busy to appear) refused to confirm that his department did not know of the policy prior to Mr Cameron’s announcement. Channel 4 News revealed that Decc had been asked about the idea at the weekend but had rejected it.

Mr Hayes has promised that the government will legislate over energy prices but that the shape of the bill will not be known until it has been discussed by parliament.

In 2011, then energy secretary Chris Huhne wrote to power companies asking them to tell consumers, especially the most vulnerable, if they were not on the cheapest tariff.

And as Channel 4 News Political Editor Gary Gibbon pointed out, “Competition could easily be stifled if all suppliers felt under legal pressure to provide a minimum tariff. Oh, and for good measure it’s probably illegal under EU law.”

How have campaigners reacted to the PM’s statement?

Which? Executive Director Richard Lloyd told Channel 4 News: “The prime minister must stick to the promise he made in Parliament to legislate so energy companies have to give the lowest tariff to their customers.

“Just giving people information on the lowest tariff is not enough when trust is at an all time low in the industry and switching levels are falling. Which? has been pressing the government for years to make sure people get a better deal so we must now see these words turned into action.”