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Sunday, March 12, 2017

Energy companies are 'ripping off millions'

Claims by the Department of Business, Energy and Industrial Strategy that millions of people are over-paying for gas and electricity because of excessive price rises by the big six energy companies have highlighted once again, the need for drastic measures to control the market and protect consumers.

The Observer says that so far this year three large companies have announced price increases of just under 10% on dual-fuel standard variable tariffs, adding about £100 a year to customers’ bills. Last month Npower announced an increase of 9.8% and last week E.ON said it was raising charges by 8.8% from April. They continue:

EDF raised electricity prices in December but cut gas prices, amounting to a 1.2% increase. SSE will announce its plans at the end of this month, while British Gas has said it will freeze prices until August. Several medium-sized suppliers have also raised prices: Good Energy, up 11%, First Utility, up 9.7%, Utilita, up 2.9%, Co-operative energy, up 5%, and Ovo Energy up 1.5%. The latest increases come despite the energy regulator Ofgem recently saying it saw no reason for the big six to raise prices despite upward price pressures, because of the way they hedge when buying power.

Ofgem believe that energy bills now account for 10% of spending in the poorest households, compared with just 5.5% in 2004. A debate has been secured on Thursday by three MPs from across parties, who say that customers are often being switched on to expensive standard variable deals without their knowledge, once their lower tariff periods expired:

According to former Tory Minister, John Penrose: “Loyal customers are being systematically ripped off by big energy firms, and it’s just not fair. Most industries don’t exploit their best customers like this, by quietly switching them on to expensive default tariffs when their existing deal comes to an end. Loyalty should be rewarded, not exploited.”

He is going to propose a new “relative price cap”, under which customers cannot be transferred to a new deal more than 6% more expensive than their expired one.

The paper says that a recent report into the energy market by the Competition and Markets Authority, commissioned by David Cameron before the 2015 general election, found customers had paid £1.4bn a year in “excessive prices” between 2012 and 2015, with those on standard variable tariffs (70% of the total) paying 11% more for their electricity and 15% more for their gas than customers on other tariffs.

This is clearly unacceptable. The government need to step in to break up this oligopoly.
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