Energy firms 'should explain rises' - Belfast Telegraph

28 October 2013

The energy companies should account to their customers for the latest round of price rises, amid new evidence that they are outstripping increases in the wholesale costs of gas and electricity, Downing Street has said.

Data from the industry regulator, Ofgem, shows that while price rises announced this autumn by the companies have averaged 9.1%, wholesale prices have risen by just 1.7% - adding just £10 to the average household bill of £600.

The Prime Minister's official spokesman said that it was up to the companies to justify their charges to consumers.

"It is for the energy companies to explain the decisions they have taken around bills to their customers," the spokesman said.

Labour said the figures showed that the Government was failing to get tough with the companies amid mounting public concern over the soaring costs to households.

Shadow energy secretary Caroline Flint said: "Energy companies always blame rising global energy prices for putting up people's bills, but these figures show that under David Cameron they've been increasing their profits on the back of spiralling energy bills for hard-pressed households.

"If energy companies won't treat their customers fairly, then people deserve tough action from the Government. But David Cameron shows how out of touch he is, refusing to act."

The latest disclosure comes as the "Big Six" energy companies prepare to give evidence to the Commons Energy and Climate Change Committee when they are expected to face a rough ride from MPs.

Also this week, Energy Secretary Ed Davey will set out details of the annual competition test for the energy market - announced last week by the Prime Minister - to be carried out by Ofgem in conjunction with the Office of Fair Trading (OFT) and the Companies and Markets Authority (CMA).

Pressed on whether the decision to bring in the OFT and the CMA reflected concerns that Ofgem was not proving to be effective, the Prime Minister's spokesman said: "It is important and helpful to bring in experience from other sectors.

"That is one of the reasons why, alongside Ofgem, you have the OFT (Office of Fair Trading) and the Competition and Markets Authority."

Mr Cameron, speaking at the Mini plant in Oxford, stressed the importance of opening up the market to new entrants.

"I'm frustrated about the Big Six. I want to see the Big 60, I want to see many more energy companies," he said.

"Since we came to office, there have been eight new companies come in and start in terms of selling electricity and gas. That's helping competition."

Ofgem said that its estimates for the wholesale price were based on how a representative supplier would typically buy energy, using forward purchases of gas and power at 12, 18, or 24 months ahead, to smooth out volatility in prices.

These buying strategies vary between suppliers, meaning each sees different overall changes to wholesale energy costs.

But Ofgem said that looking ahead to this winter, the price paid for energy by suppliers was rising sharply compared to last winter, with gas up 8% and electricity up 13%.

"Ofgem has been at the forefront of making the energy market more transparent for consumers over the past few years," a spokesman said.

"In publishing these figures Ofgem is giving consumers greater understanding of the relationship between energy bills, wholesale energy prices and the other costs that make up energy bills."