Ministers threaten action on energy company price rises

Ministers have reminded UK energy companies they are “prepared to act” over household bills after another of the “big six” utility companies hiked its prices.

Eon, the German utility, on Tuesday announced a near 9 per cent increase in bills for customers that are on a standard rate for electricity and gas, blaming increases in costs that are beyond its control, including expenses associated with government energy policies.

A spokesman for the Department for Business, Energy and Industrial Strategy, which has been upping its rhetoric towards the utility companies, said in response to Eon’s announcement:

We expect energy companies to treat their customers fairly and continue to be concerned by these price rises which will hit millions of people already paying more than they need to. Wherever markets are not working for consumers, this Government is prepared to act.

Eon’s price rise follows similar moves by other “big six” providers Npower and ScottishPower. EDF Energy has also raised electricity prices for customers on standard rates.

However, it is not just the big, incumbent players that have announced increases; First Utility, one of the biggest independent challengers, also last month announced price increase for customers on a standard variable tariff. First Utility said a small proportion – 13 per cent – of its customers would be affected.

Some 62 per cent, or 2.5m customers, of Eon’s customers will be affected by today’s announcement.

The government is due to publish this spring a consumer green paper looking at specific sectors it does not feel are functioning properly, including the energy market.

Ministers are also due to respond to the final recommendations of a probe into the energy retail market published last year by the Competition and Markets Authority, which ruled out a price cap for customers on standard rates.

However, speculation over a cap has resurfaced in the wake of recent price hikes.

Deepa Venkateswaran, analyst at Bernstein, has calculated that a standard tariff cap would save an average “big six” customer buying both gas and electricity from the same supplier £90 on average each, with a collective impact of £1.7bn.

Customers of the larger independents on standard rates would save on average £130 each, she said.

Analysts at Jefferies believe that further government intervention in the energy market may lead to consolidation among utility companies.