Energy bills: Big Six face probe over high profits and prices
Largest gas and electricity firms could be forced to break up as Ofgem calls for competition inquiry
THE Big Six gas and electricity firms face a radical overhaul after the energy watchdog today referred them for a full-scale competition investigation. Ofgem, which believes the companies might be making excess profits and ripping off their customers, has referred them to the Competition and Markets Authority (CMA), reports the Daily Telegraph. The Big Six energy suppliers – British Gas, SSE, Npower, EDF, Scottish Power and E.ON – control around 95 per cent of Britain's energy supply market. Their energy retail profits have soared from £233m in 2009 to £1.1bn in 2012 “with no clear evidence of suppliers becoming more efficient in reducing their own costs”, said Ofgem. The CMA investigation, which is likely to begin in June and could last up to two years, could see the major players forced to break up.
Which companies have put their prices up?
All of the Big Six power suppliers announced an increase in prices last year, but the size of this increase has been reduced since the government announced a plan to restructure green levies. British Gas initially put its bills up by 9.2 per cent in November, but reduced the rise to 3.2 per cent on 1 January. EDF Energy prices were hiked by 3.9 per cent on 3 January, while E.On prices rose by 3.5 per cent on 18 January. Both rises take into account the expected cut to green levies, and both companies are also issuing a £12 rebate. Npower initially raised its prices by 10.4 per cent in December but has now agreed to cut bills by £38 from 28 February and will also issue a £12 rebate later in the year. Scottish Power, which raised prices by 8.6 per cent in December, cut its rates by £54 on 31 January. SSE increased its prices by 8.2 per cent in November, but cut its rates by £50 earlier this week. It also announced yesterday that it will be freezing its prices until at least 2016.
How can you keep costs down?
Fixed-term energy deals are becoming an increasingly attractive option as prices soar. Most suppliers offer a fixed-price deal, in which they freeze the cost of electricity and gas units for a set period. However, some tariffs do incur cancellation penalties if you pull out early. One of the cheapest tariffs at the moment comes from First Utility, which costs an average £1,013 a year. One of the longest fixes currently available is from Sainsbury's Energy, which lasts until April 2018, costing £1,316 a year.
Are there any other discounts or deals?
David Cameron has previously recommended shopping around for the best deal in order to save cash, a process made easier in recent years with the introduction of price-comparison websites. Paying bills by direct debit and sending off regular meter readings to ensure you are paying for actual usage can also help to save money, as can signing up for both gas and electricity from one supplier and changing to online-only bills.
What other steps can you take?
Draught-proofing your house and insulating hot water cylinders and exposed pipes can help save cash by keeping heat in. Campaigners say investment in house insulation is the only way to control high energy bills and have called on the government to help home-owners tackle the problem. Installing a room thermostat can also help regulate where and when you heat your home, while ensuring lights and appliances are turned off when you don't need them can also contribute to lower energy bills. You could do as energy secretary Ed Davey does: wear a jumper and turn down the heating. Reducing room temperatures by just 1C could apparently cut your heating bill by as much as £65 a year. However, Public Health England has urged people to keep their living rooms heated to at least 21C and other rooms at 18C to avoid potentially fatal health problems.
How do UK costs compare with prices in other countries?
According to Department of Energy and Climate Change statistics for 2012, average domestic gas prices in the UK are lower than several European countries, including Germany, France, Ireland and Spain, but more than double the prices in the United States. For electricity, UK prices were the fifth lowest among 15 EU countries. However, the UK is second only to Estonia for people struggling to pay their energy bills across Europe, with more than five million UK households living in ‘fuel poverty’. Campaigners say households pay much higher bills due to the amount of heat lost from homes.