Large Increases to Heating and Energy Bills Likely This Year

Senior management of the big six utility companies in the UK have confirmed that bills for electricity and heating gas are most likely to rise substantially this year. The senior managers have been answering questions about the rising heating bills from members of parliament on the parliamentary business and enterprise select committee.

Suppliers of electricity and gas are under pressure to clarify their recently revealed intentions to increase household energy bills by up to 40% this winter. Experts estimate that households may have to pay around £400 extra this year on average for electricity and gas for heating and cooking.

Chief executive of Centrica (the company that owns British Gas) said it was “clear that gas prices are going to have to move up.”

With the cost of gas moving closely with the cost of oil, it is easy to see that increases are likely, with the cost of oil reaching new records almost on a weekly basis. Latest estimates are that the cost of gas has risen by 70% in 2008.

The energy market is known to depend on long term contracts for gas and electricity supply which involves the big European energy producers. The big producers are accused of excluding any competition that would otherwise forced prices down.

This argument is denied by the big energy companies, but some senior managers admit that the markets could work better.
MPs have asked the energy companies’ senior executive about extra help to low-income and disadvantaged households to help them deal with the rising cost of heating and electricity.

Ofgem, the watchdog, is conducting an inquiry into the market and has outlined plans last month to share data on people on low income with energy companies to help them pay their heating and electricity bills.

According to the government, there are 2.5 million households in fuel poverty in the UK. Fuel poverty defined as when more than 10% of household income is spent on fuel bills. Energywatch, the watchdog says the figure is more than four million.