Npower has begun yet another round of energy price rises. Its gas and electricity bills will increase by double digits. According to some estimates, consumers can expect to pay an average of around 1,000 to heat and light their homes this year.
Npower says the whopping new year increases were inevitable due to recent rises in the cost of buying energy through the wholesale market. On first reaction, this seems fair: the power firms are not charities and at some point their costs have to be passed on through higher bills.
However, as consumer watchdog Energywatch has pointed out, there is a bad smell about this. Between 2003 and 2006 bills rose by around a half, with soaring wholesale prices cited as the reason. But this was followed by some substantial falls in wholesale prices, and what did the energy firms do? They lowered our bills by a few miserly percentage points.
Their foot-dragging prompted industry regulator Ofgem to issue a warning last February that double standards over billing wouldn't be tolerated. Since this exercise in sabre rattling, Ofgem has kept quiet.
The suspicion among consumer groups, the charities that deal with the UK's four million "fuel poor", and much of the general public is that the volatility in the wholesale market is being used by the power companies to make excessive profits. This impression is not helped by the confusing range of tariffs available. You pay less or more for your energy depending on whether you're billed online, pay by direct debit or receive a quarterly bill. As for the six million families with pre-payment meters, they pay more than every other group despite being far more likely to be on a low income.
Who is to say whether power firms are skimming? The mathematics are beyond me but they should not be beyond Ofgem. With the other five big power firms poised to follow npower's lead, the regulator must be proactive and scrutinise each rise, crying foul if it feels that consumers are getting the rough end of the deal.
Ofgem can't just rely on people's increasing willingness to switch to a cheaper supplier to keep the power firms honest. All in all, a profitable energy sector is good news for shareholders and employment, but profiteering sucks precious cash out of consumers' pockets. It also punishes, through excessive charges for pre-payment, some of the weakest members of our society.Reuse content