Millions pushed into fuel poverty by energy hikes

british gas's price rises of 18 per cent for gas and 16 per cent for electricity, announced yesterday and coming into effect on 18 August, will push more families into fuel poverty, Consumer Focus has warned. "This price rise will send a shock wave across the country," its chief executive, Mike O'Connor, said.

"The impact on customers will be severe, piling more pressure on severely stretched household budgets and pushing hundreds of thousands more households into fuel poverty."

It is a major problem. Money Advice Trust, a debt advice charity, reports a huge rise in the number of people with fuel debts seeking advice. Since 2007 National Debtline, which is run by Money Advice Trust, has seen a 181 per cent increase in the number of people with fuel worries. In the past 12 months alone the charity says it has seen ten per cent more people calling in with fuel debts.

Energy companies have come in for criticism for the way they have handled price rises, but British Gas's latest hikes – following Scottish Power's already announced 19 per cent energy increases from 1 August – will simply add to consumers' mistrust of energy companies. The question is whether fuel prices are fair.

"Wholesale costs have gone up but they are still around a third lower than their 2008 peak." Mr O'Connor said. "Yet in this time British Gas's prices alone have risen by around 44 per cent on gas and 21 per cent on electricity."

British Gas last raised prices in December 2010. Then they climbed 6.9 per cent or £43 a year for gas and 6.7 per cent or £28 a year for electricity. Next month's increases mean that, in total, within the space of a year British Gas customers will have seen their bills grow by £258 a year.

Mr O'Connor called yesterday for the Competition Commission to clean up the energy market and for there to be "a clear strategy to help those in the most severe fuel poverty through energy efficiency, and better take-up of social tariffs."

There also needed to be an end to complex and confusing tariffs, he said. "The Big Six must start treating their customers fairly, right from how they market products through to how they treat people who cannot afford to keep warm," Mr O'Connor said.

Fuel poverty is defined as when someone is forced to spend at least 10 per cent of their income on energy bills. Before the latest round of rises the Centre for Sustainable Energy calculated that 5.1m households were living in fuel poverty.

If the other four energy companies follow Scottish Power and British Gas – which is almost a certainty – a further 1.3m households will face fuel poverty, bringing the total to a shocking 6.4m homes.

It makes it even more crucial for household to find the best energy deals and look at ways to cut fuel bills. Scott Byrom, an energy manager at Moneysupermarket, said: "Now really is the time to get on to the best fixed-price energy tariff for your usage level and area you live in. Opting for the market-leading Fix Saver v2, from EDF Energy is the best way to safeguard against increases."

Ann Robinson of uSwitch agrees. "There is no room for complacency and I would urge consumers to act now," she said. "Fixing your energy prices is an option that offers security and peace of mind."

If you are struggling with energy bills, there is help, says Joanna Elson, the chief executive of Money Advice Trust. "First, free advice agencies like National Debtline can help people put together a budget and identify whether someone is paying too much for their utilities.

"Second, individuals can contact their provider to arrange an affordable repayment plan, or use a pre-payment meter.

"Third, some fuel companies have set up trust funds that can sometimes pay fuel bills where customers are in financial difficulties."

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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