Published on 7 Jun 2011 Sections ,

Scottish Power leads way with big energy price rise

Britain’s hard-pressed householders face a new blow, as the big power companies prepare a round of double-digit price rises. Faisal Islam says it will push up inflation and pressure interest rates.

Scottish Power was first off the blocks, announcing a 19 per cent increase in the price of gas and ten per cent more on electricity tariffs from 1 August. It means that the average household on a dual fuel tariff will have to pay £180 a year more – taking their total annual bill to around £1,400.

It seems certain that the other five big energy companies will follow Scottish Power’s lead, announcing big rises in their prices in the coming weeks.

Scottish Power said that wholesale supply costs had risen by 30 per cent since it had last increased prices last November.

Gas ring (Reuters)

Its UK retail director, Raymond Jack, said: “Wholesale prices for gas and electricity have increased significantly since the end of last year and continuing unrest in global energy markets means future prices are volatile.

“We understand times are difficult for many people, and we have done what we can to absorb these additional costs for as long as possible to minimise the impact on our customers.”

“This is going to add to inflation that is already well over target and increase pressure on interest rates.” Faisal Islam

Channel 4 News Economics Editor, Faisal Islam, said this type of increase was not just “inflation-busting”, but inflation-creating.

“The Bank of England was counting on moves of ten to 15 per cent up,” he said. “This is larger than that. This is going to add to inflation that is already well over target and increase pressure on interest rates and other things.

“So it’s very concerning for people’s declining living standards and very concerning for things like fuel poverty. Already a fifth of people are in fuel poverty – even more now as a result of these rises.”

Scottish Power said that 700,000 customers would be protected from the full effect of the rises by capped or fixed-price deals.

‘Body blow’

But the energy watchdog, Consumer Focus, said the increase would be a “body blow” to householders.

Its spokesman, Adam Scorer, told Channel 4 News: “This is an essential market. It means people keep warm and keep well.

“We need to absolutely know whether energy companies play fair with consumers and price fairly. If they don’t then the regulator or the Competition Commission, or the Government have got a job to do to make sure this market is reformed.”

The energy regulator, Ofgem, recently threatened to report the “big six” energy companies to the Competition Commission if they failed to “play straight” with the consumer. It published a report saying that they had put up prices more quickly than they had reduced them when costs fell and ordered them to give customers a minimum of 30 days’ notice before putting up prices in future.

The Energy and Climate Change Secretary Chris Huhne, said today’s announcement would be “disappointing news” for millions of Scottish Power customers. But he said the Government’s “Green Deal” would help householders to upgrade their homes to waste less energy and would encourage the development of clean energy sources which were not vulnerable to global price shocks.