Watchdog claims price rises are unjustified

Energywatch says the energy market is uncompetitive and price increases are unjustified.

There have been questionable rumours of collusion floating around the utilities industry following January’s price hikes from npower, EDF Energy and British Gas. Several consumer groups responded to the increases by calling for a Competition Commission investigation.

Last week, consumer watchdog Energywatch went one step further by declaring that the energy market is uncompetitive and the price increases are unjustified. It claims that the market is simply not working well and consumers are paying much more than they need to as a consequence.

So can the energy companies really justify their price hikes?

Certainly it’s undeniable that wholesale gas prices have increased. According to figures in the Guardian, British Gas claims that there has been a 51% increase in its costs due to the wholesale gas rise and new environmental charges. This was actually one of the lower estimates with npower claiming a 66% rise in its wholesale gas costs and EDF Energy reporting a whopping 117% increase.

Ofgem by contrast contradicted all of these claims – instead suggesting there has been a 31% rise in one-year forward wholesale gas prices and that the correct figure for electricity is 40%.

British Gas customers can feel relieved that its cheapest tariff, the online-only Click Energy 4 deal, has been spared from the price hike. In addition, the company has said it will hold off on the increase for its 340,000 most vulnerable customers until after the coldest weather had passed in March. Scottish & Southern Energy meanwhile, has issued a price freeze across the board until at least March 30.

With the highest price increase so far being just over 17% from npower, perhaps customers have got off lightly – but not so according to Energywatch who can point to the fact that the six largest energy suppliers in the UK made collective profits in excess of £2bn in six months alone last year.

The watchdog is questioning why energy companies are so quick to pass on any increases in wholesale gas prices, but so slow to react when prices fall.

Clearly some price increases are unavoidable, but the size of the increases and their timing seems unfortunate at best.

That is why I am calling on the energy companies to disprove the rumours of collusion by introducing more competitive tariffs. In the meantime however, the onus falls on the consumer to shop around for the best deals.

DISCLAIMER: Please note that any rates or deals mentioned in this article applied at the time of writing and may no longer be available/applicable today.

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