In the current economic climate, the last thing that we want to see arriving through our letterboxes is a bill from our gas and electric suppliers notifying us that our direct debits for the supply of energy to our homes are increasing yet again.
Latest price rises
Worryingly, this continued to happen towards the end of 2012 with British Gas increasing both its electricity and gas prices by 6%, and npower increasing electricity and gas prices by 9.1% and 8.8% respectively. Those increases were significantly above the rate of inflation and were poorly received by energy customers.
Why energy prices are rising
The energy companies blamed these increases on the wholesale price of gas and electricity and on government policy. Paul Massara, Chief Commercial Officer at npower stated: “There is never a good time to increase energy prices, particularly when so many people are working hard to make ends meet but the costs of new statutory schemes, increases in distribution charges and the price of gas this winter are all being driven up by external factors, for example government policy.”
British Gas felt that prices would rise again in 2013 due to the increased cost of implementing the government’s energy policies that included increasing the use of renewable energy. The government has stringent targets to meet for renewable energy, alongside the reduction of the UK’s carbon footprint.
Also, the Energy Company Obligation (ECO) scheme that is designed to assist low-income households may be increasing energy costs for higher income households. Furthermore, wholesale gas prices had risen by 13% in 2012, and with reduced supplies of gas from the North Sea, our increased reliance on imported gas means that shocks in global prices continue to increase our bills at home. Upgrading of the National Grid will put further upward pressure on prices. These factors plus the cost of delivering the energy supply could add as much as £80 to the average residential fuel bill in 2013.
Some affected more than others
So once again, later in 2013, we may be getting those unwanted letters from our energy suppliers notifying us of further increases in our direct debits for our gas and electricity bills. This will be unwelcome for energy customers across the board. A survey of the over 50s, questioning them about their energy bills and conducted by Saga, shows how concerned we are. Of those who took part in the survey, 58% were worried about the amount of their heating bills and 35% admitted to struggling to pay them.
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