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Are the days of cheap power bills at an end?

MILLIONS of gas and electricity users face further increases in their bills - despite the recent record price rises.

Scottish Gas and ScottishPower, the two biggest players in the market, refused to rule out a further round of price rises. A ScottishPower spokesman admitted: "The era of cheap electricity is over."

Energywatch Scotland, a industry watchdog, advised consumers to shop around to find a better deal on their fuel bills. It said consumers should now switch from the main suppliers as another increase in bills would widen the divide between the two big players and the rest of the market.

Graham Kerr, a spokesman for the watchdog, said: "People should no longer be scared to move away from ScottishPower and Scottish Gas. If you live in Scotland you can not buy any more expensive gas than Scottish Gas, or more expensive electricity than ScottishPower. Every other supplier available is cheaper.

"I would advise any consumer not to fear making the switch. It is the same gas and the same electricity you are supplied with after making the switch. The only difference is that you save money."

Scottish gas bills have risen continuously since 2002, with the biggest increase coming in the past year.

ScottishPower has increased prices by 11.8 per cent for gas and 8 per cent for electricity, effective from 4 October. Scottish Gas increased prices by of 12.4 per cent for gas and 9.4 per cent for electricity, which came into effect on 20 September.

The recent increases have highlighted the benefits to consumers who switch energy suppliers. When switching from both gas and electricity, a low user will save £119 a year: £70 on gas and £49 on electricity. A medium user will save £175 per annum: £94 on gas and £81 on electricity. And a high user will save £224 a year: £125 on gas and £99 on electricity.

Energywatch Scotland has also advised consumers not to be concerned about poorer customer service from a new supplier. All of Scotland’s major suppliers are broadly similar, offering similar payment methods and receiving a similar number of complaints, it said.

Mr Kerr said: "Do not stay loyal to Scottish Gas and ScottishPower because of the ‘Scottish’ tag. They are not Scottish companies - the ‘Scottish’ tag is only a branding exercise. They have many more customers in England."

The average annual gas bill for a medium user with Scottish Gas is now £452 - £52 higher than their next competitor.

Scotland has experienced fractionally cheaper energy prices since industry privatisation in 1990. In real terms, the average gas bill remains just £3 higher than it was 14 years ago, while electricity has actually fallen by £23 in that period. Experts say that, as a result of trying to gain a foothold in the market economy, the energy suppliers have been keeping prices artificially low for too long.

Higher wholesale gas prices have been blamed for the rising costs. A report by the energy regulator Ofgem, published yesterday, said the increase in wholesale prices was a result of the cost of imports and falling domestic supplies. The report concluded that 30 per cent of the recent rise is due to high oil prices in Europe.

Colin McSeveny, a spokesman for ScottishPower, said: "The era of cheap electricity is over. All companies will pass on the wholesale price increases to their customers. There will be similar increases in different ways. However, we will try to keep our prices as competitive as is possible."

The fear for consumers is that this latest round of energy price rises may only be the start of a trend as the price begins to become more realistic. While average electricity prices gradually rose by £2 in 2002, £4 in 2003 and £7 this year, average gas prices exploded, with a large 19 per cent rise in 2002 followed by a modest 8 per cent rise in 2003, then a huge 52 per cent rise going into 2004.

Scottish Gas also refused to rule out the prospect of future price rises being passed on to the consumer. Suppliers already suffered from a 28 per cent rise in wholesalers’ prices in 2004, with a predicted 25 per cent rise in 2005.

Clare Welsh, a spokeswoman for Scottish Gas, admitted that future wholesale price increases may be passed on to customers again through further rises next year.

She said: "We need to respond to market conditions. Nobody likes to put up their prices, but we need to respond to the rises that we suffer. If we’re increasingly relying on imports, then we’ll have to combat that. In terms of future price announcements, there are no plans.

"The action that we have taken was aimed at making us less exposed to market fluctuations. Our main aim remains to offer a secure supply of service and good customer service. We’ll work with any customer who contacts us and help them deal with their bills. Changing their methods of payment may help offset the cost of the rises."

Scottish Hydro-Electric has announced that they will not be putting up prices until at least the end of the year, and as far into winter as they can sustain.

Alan Young, a spokesman for the company, said: "It is undoubtedly true that wholesale gas prices have gone up significantly and companies respond to that in different ways. We have decided, in the competitive market, to hold prices for as long as we possibly can."

However, Energywatch Scotland remains concerned that consumers may be suffering from information about the market not being available to them.

Graham Kerr said yesterday: "Transparency in the market is essential.

"Something strange is happening further up the supply chain, and there is even speculation that there could be a cartel operating. Until it is investigated, we won’t know.

"Suppliers need to demonstrate quite clearly why their prices have gone up and how they’ve passed on the cost to the consumer."

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