British gas (and now npower) raise energy bills – Liveblog
4.07PM – Npower jumps on the price hike bandwagon
NPower follows British Gas this afternoon, announcing a price rise of its own. NPower has gone one step further than British Gas with price rises of 8.8 per cent for gas and 9.1 per cent for electricity. The price hike means average duel fuel energy bills will rise by about £108 per year.
So what are the reasons for this increase? According to Paul Massara, Npower chief commercial officer, it’s down to a combination of factors:
“The costs of implementing new government schemes, increases in distribution costs and the price of gas for the coming winter and beyond are due to external factors that we do not control.”
The Npower press release repeatedly points the finger at green policies, such as the Renewables Obligation, as the main cause of these price rises.
“We support moves to reduce carbon dioxide emissions but new government schemes will mean that energy bills will rise.”
The energy company does acknowledge rising wholesale energy prices as a factor, but lays most of the blame with green energy policies.
“Higher average wholesale energy prices […] have increased by approximately 5% since last winter. The environmental portion of the bill (driven by the Renewables Obligation) has also increased by 25%.”
1.18PM
The ENDS article is now available free, thanks to Alex Marshall.
10.37AM – ‘Brutish gas’
The Sun is running the story as ‘ It’s Brutish Gas‘.
Meanwhile, a little light has been shed on what the Times front page is talking about – the paper claims government wants to “sidestep climate change targets” to build new gas plants.
An article in the ENDS report, which is a sort-of trade journal of the energy industry, pointed out earlier in the week that any 2030 decarbonisation target the government tries to secure with the forthcoming energy bill is likely to have a degree of flexibility in it.
The Times has written:
“Ed Davey, the Energy Secretary, told The Times that he wanted to introduce a loophole which would allow new fossil fuel plants to be built.”
The full ENDS article by Alex Marshall is worth a read, although it’s paywalled, but the relevant snippet is:
“…the government is expected to put forward a more flexible target. This could say the UK will aim for 50gCO2/kWh by 2030, but this will be pushed back to 100g if the costs of meeting it appear too high.
The 100g target would allow the UK to get 15-20% of its electricity from gas in 2030.”
It appears likely that it’s this flexibility that’s being talked about here. A target of 100 grammes per kilowatt hour would allow unabated gas to provide 15-20% of UK electricity supply, ENDS reports. Indeed, Ed Davey has already endorsed the prospect of up to 20 new gas power plants. (Although the details are somewhat vague, as we have pointed out.)
If this is what the story is about, and there isn’t a lot of detail in the Times piece so it’s hard to be sure, then this isn’t really a new announcement. We’ll have a more in-depth look at the Times piece later in the day.
10.19AM – The British Gas explanation
Here’s British Gas’ explanation for the price rise, given in an interview with Sky News –
“…there are three principal factors here – Britain’s North Sea Gas is running out, we’re importing more than half of what we use now and we have to pay the going rate on a global competitive market, and right now that’s 13% higher than a year ago.
Secondly the National Grid, the pipes and wires need an upgrade, and that’s paid for through the bills.
And thirdly the government’s various energy policies, all of which are right, in terms of cleaning energy, improving the energy efficiency of Britain’s homes and directing financial help to those most at need, the cost of all that’s rising, together that’s 85 per cent of a bill.So we’ve done what we can to keep that to a minimum by cutting our own costs, and putting in place a range of help for our customers to keep their bills down.”
One of the reasons cited by British Gas for the price rise is the rising cost of wholesale gas.
We have looked at this is in the past – noting that the biggest upward pressure on bills recently has been rising wholesale gas costs, but also that if and when this price rise slows down, it often doesn’t translate directly into reductions in consumer bills.
Consumer Focus have produced a handy graph showing how wholesale gas prices have varied over the past five years – along with how the average consumer bill has changed. The point they make is that falls in gas wholesale price (in blue) are often not matched by falls in bills (in red).
Image - Wholesale -v -retail -gas -prices -October -20121-1024x 724 (note)
9.54 AM – Times front page suggests “Government wants to sidestep climate change targets”
The Times have reported on its front page that:
“…ministers plan to build dozens of gas power stations in an attempt to reduce energy bills, in defiance of green campaigners.
The Government wants to sidestep climate change targets in an effort to stem soaring electricity prices. Ed Davey, the Energy Secretary, told The Times that he wanted to introduce a loophole which would allow new fossil fuel plants to be built.”
DECC has tweeted:
“Times story is inaccurate! There is no change in govt’s complete commitment to meeting climate change targets.”
9.43 AM – Energy bills return to the front pages
Energy bills have returned to the front pages today – both the Times and the Express lead with stories covering British Gas’ decision to raise its consumer’s fuel bills.
In a statement on its website, British Gas writes:
“British Gas, Britain’s biggest energy supplier, has today begun notifying its customers that it will raise domestic gas and electricity prices by an average of 6% on 16 November 2012.
As a result, annual dual fuel bills for British Gas customers with average consumption will increase by around £80.”
Last night the BBC was reporting that British Gas were going to raise bills by 8 per cent or £100, so it would appear that the initial rumours about the price rise were slightly inflated.
According to the Today programme:
“Of the eighty pound increase the company says twenty-five will go for national grid charges for upgrades to that system, twenty-five for government renewable obligation – green stuff – and the other thirty due to a 13 per cent rise in wholesale gas prices.”
The Today Programme also reports that profits for Centrica – British Gas’ parent company – are up five per cent this year, and shareholder dividends are up eight per cent.
The managing director of British Gas, Phil Bentley, suggested that the price increases were linked to changes in the power system:
“These are important investments – investment in the infrastructure of Britain, the grid, is what will keep the lights on, and investment in all the green energy… energy efficiency and green economy not only creates jobs but it also helps our homes to become more energy efficient and that’s the best way of keeping bills down.”
The BBC helpfully summarises how the company’s energy bills have changed in the past year or so:
“British Gas last raised its tariffs in August 2011, when gas prices went up by 18% and electricity prices by 16%. Then in January 2012, it cut its electricity prices by 5%.”
The Times story, meanwhile, reports that “ministers plan to build dozens of gas power stations in an attempt to reduce energy bills, in defiance of green campaigners”, apparently based on an interview with Energy secretary Ed Davey – but it’s not yet clear whether this amounts to a new policy development, or just something the Times has chosen to highlight with reference to rising energy bills.