The announcement from British Gas that it is raising prices by an average of six per cent in nice time for the onset of winter provokes a mixture of anger and weary resignation. The only consolation – for its customers – is that another company, SSE, is raising its prices by an average of nine per cent from next week. But British Gas is Britain's biggest energy supplier and the distinctly unimpressive manner in which its managing director, Philip Bentley, approached his interview yesterday on the BBC Today programme hardly did the company any favours. The best that can be said is that at least Mr Bentley showed up – unlike, say, anyone from the BBC to tackle revelations about Jimmy Savile on Thursday's Newsnight, but that is another story.
Of course, no price rises are ever popular, and they are especially unpopular in the present economic climate when they affect goods or services most people would regard as essential and wages have not kept pace with inflation. Nor can the argument repeatedly advanced by the energy companies – that the price of energy reflects the state of the global market – be dismissed out of hand. But when the price rise is so clearly out of kilter with inflation generally – a rise of six per cent as against an inflation rate of 2.5 per cent – and when British Gas is at the same time reporting half-year profits of £345m, up by 23 per cent, and a dividend of eight per cent for its shareholders, customers are entitled to feel aggrieved. Over the past 15 months they have seen gas prices increase by 18 per cent, and electricity prices by a net 11 per cent. The cards seem to be stacked against them in every way.
Nor is it any real answer to the central contradiction – hefty price rises for consumers and a whacking profit for the company – to talk at length, as Mr Bentley did yesterday, about insulation and seeking out a more suitable tariff. Yes, British homes could do with being better insulated and British Gas's offer of free insulation is welcome. But the gain from insulation is a one-off, while price rises seem eternal, and shopping around, either for a better tariff or for an alternative supplier, all too often seems to reap rewards that are paltry compared with the quantities of time and effort involved.
With price differences between suppliers so relatively small and the various schemes so complex, consumers can be forgiven for their cynicism about the benefits – for them – of energy deregulation. The less well-off have even greater cause for complaint, as their energy needs are often greater than average and they may have no choice but to use prepaid meters. For most people, the surest way to cut costs is to cut consumption, which may have negative effects on quality of life and health.
British Gas and the other utilities companies have arguments on their side. With North Sea oil drying up, the UK has no choice but to buy on the global market, and our infrastructure is in sore need of more investment. A greener and more modern energy supply comes, initially, at a price. Consumers should expect to find such expenses on the balance sheet. A profitable company should also be good for jobs and for shareholders – which include big pension funds.
So there is something to be said in mitigation. But if British Gas is to avoid the charge that it is enriching itself at the expense of hard-pressed consumers, it will have to do a much better job of arguing its case. Unless it can, consumers will draw their own conclusion from the mismatch between price rises and profits, and calls for changes, such as a cap on profits or the creation of a tougher competitive environment, could be hard for any government to resist.