Energy bosses to face MPs

Jun 24 2008

THE UK’s six biggest energy firms will defend their price increases in front of a panel of MPs later today.
Bosses from British Gas, EDF, npower, E.ON, Scottish Power, and Scottish & Southern Energy will face the Business and Enterprise select committee amid growing public anger over prices.
The average dual fuel customer is now paying nearly 15% more - £1,048 - for gas and electricity after the latest round of increases earlier this year, according to consumer watchdog Energywatch.
This is nearly double five years ago but there is growing speculation that bills could rise as much as 40% later this year as firms tackle rising costs, adding a potential £400 to straining household budgets.
British Gas parent Centrica gave a clear signal of the hikes to come in May when it said it would take the “necessary action” to deliver reasonable margins at its residential business.
The chiefs of the “big six” are set to face a hostile reception, but are likely to argue the doubling of wholesale gas prices for the coming winter give them little option.
In Europe, wholesale gas costs are linked to oil prices, which have surged to near 140 US dollars a barrel. European firms can often buy cheaper gas in a more liberalised UK market to fulfil immediate needs and stockpile it.
In the past three months as oil reaches new highs, gas has been steadily flowing from the UK to Europe through the 143-mile Interconnector sub-sea pipeline between Bacton in Norfolk and Zeebrugge in Belgium.
Customers are also sharing the extra cost of the industry’s efforts to tackle climate change through cutting carbon emissions and sourcing more electricity from renewable sources.
The MPs launched their inquiry into the market in May to look at the case for referring energy firms to the Competition Commission, and examine whether companies and the Government are doing enough to help the fuel poor.
Energy regulator Ofgem - which launched its own probe into the UK gas and electricity markets in February - last week told the committee it had acted because of the similar way in which five of the six energy firms hiked their bills during the winter, with only SSE waiting until March.
Rising gas and electricity bills have been a major factor alongside food and oil prices in inflation heading more than 1% above official targets.
This prompted an explanatory letter from Bank of England Governor Mervyn King to Chancellor Alistair Darling last week after the Consumer Prices Index reached 3.3% in May - the highest on record for the benchmark.