Government holds summit over rising energy bills

LONDON Mon Oct 17, 2011 1:54pm BST

Lit hobs glow from an electric cooker in Edinburgh, Scotland October 14, 2008. REUTERS/David Moir

Lit hobs glow from an electric cooker in Edinburgh, Scotland October 14, 2008.

Credit: Reuters/David Moir

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LONDON (Reuters) - Households struggling to pay soaring fuel bills should change supplier, check their tariffs or insulate their homes to try to save money, the government said on Monday as ministers met the "Big Six" energy companies for talks on high prices.

Energy Secretary Chris Huhne dismissed Labour calls for the government to pressure companies to use growing profits to cut bills and said it would be wrong for ministers to try to set prices.

More competition, greater transparency in the wholesale energy market and consumers shopping around would combine to drive down energy costs, he added.

With household finances squeezed, the high cost of gas and electricity has shot up the political agenda and the government is under pressure to be seen to be doing something to help families.

The energy summit comes as the coalition government faces pressure from angry consumers already feeling the pressure from weak growth, public cuts and tax rises. Unemployment has jumped to a 17-year high, inflation is more than double the two percent target and wage growth is muted.

"The companies are not the Salvation Army. We expect them to earn respectable returns for their shareholders," Huhne told BBC radio before the talks. "But they need to be operating in a fair and competitive market."

More than eight out of 10 customers have never checked to see if they could get a better deal and they should now start to pay more attention to both their supplier and tariff, he added.

Energy bills have risen dramatically in recent months as companies hike prices due to higher wholesale costs, meaning an average dual fuel bill in Britain costs 1,345 pounds a year, the watchdog Ofgem said last week.

The regulator said companies were making 125 pounds per customer in profit, the highest level since at least 2004, compared with 15 pounds in June. Suppliers dispute the figures.

Huhne said the main driver of higher bills was a rise in global energy prices and he rebuffed critics' suggestions that his environmental policies were to blame for a high proportion of the increased costs. One right-leaning thinktank accused him of pushing "unnecessary and overly expensive climate policies".


Labour energy spokeswoman Caroline Flint said the government's "warm words" would do little to help consumers and she called on energy companies to cut their prices.

"They should tell the energy giants to give up some of their profits to cut bills this winter," she said. "Warm words won't heat a single home during the bitter winter ahead."

Labour leader Ed Miliband accused the Big Six suppliers of profiting from a "rigged market" for wholesale energy.

"If the few big dominant firms were forced to sell the power they generate to any retailer, companies such as supermarkets could come into the market," he wrote in the Sunday Mirror.

Huhne said companies needed to make a decent return to be able to invest in new power stations because a quarter of Britain's electricity generating capacity will need to be replaced over the next 10 years.

In its proposed reforms last week, Ofgem said energy companies would have to simplify their billing and pricing structures which it said were far too complex to enable people to find the cheapest deals.

Britain's six largest utilities are German groups E.ON (EONGn.DE) and RWE (RWEG.DE), British companies Centrica (CNA.L) and Scottish and Southern Energy (SSE.L), French operator EDF (EDF.PA) and Spanish firm Iberdrola (IBE.MC).

Ahead of the summit, RWE's npower said it would freeze prices for customers on standard residential tariffs for the coming winter. Centrica's British Gas also announced a range of measures which included a pledge not to raise energy prices for variable rate customers this winter.

The Energy Retail Association, which represents the gas and electricity industry, said: "We're committed to some big initiatives to help as many people as possible this winter.

"We have an agreement from all the leading energy companies to contact customers with messages that encourage them to shop around for the best deal."

(Additional reporting by Peter Griffiths)