British Gas lays down gauntlet to Government with huge price rise

Company blames governemnt policy for its decision to hike electricity prices by 12.5 per cent despite wholesale prices falling 

James Moore
Chief Business Commentator
Tuesday 01 August 2017 10:54
British Gas has hiked electricity prices by 12.5 per cent
British Gas has hiked electricity prices by 12.5 per cent

“Come and have a go if you think you’re hard enough.”

That was essentially the message sent by British Gas owner Centrica to the Government with its decision to hike electricity prices by 12.5 per cent at a time when wholesale energy prices are falling and the market is under intense scrutiny.

I’m not exaggerating here. It really was that blatant.

Centrica wanted to find someone else to blame for a decision it made. So it opted for the Government – more specifically, the policies of the Department for Business, Energy & Industrial Strategy (BEIS), run by Greg Clark.

“The 12.5 per cent electricity price rise this September reflects the increasing costs of energy policy, and delivery to customers’ homes since 2014,” said the company via a statement to the Stock Exchange.

Mark Hodges, chief executive of Centrica Consumer (British Gas, in other words), then cried some crocodile tears. Centrica held off increasing prices for ages to protect its beloved customers, it really did.

But he wants you to know that Centrica cares. So there are measures to protect the most vulnerable customers from a rise that will add £76 to the average family’s bills, taking then to £1,120 at a time when wages are failing to keep pace with inflation.

Iain Conn, his boss, was also out and about beating the drum. We’d be selling your leccy at a loss if we didn’t do this. And don’t you know I have a bonus to think of? So just you blame those rotters in Westminster and Whitehall.

Unfortunately for Mr Conn and his company, the rotters in Westminster and Whitehall had a rather detailed answer prepped (in other words they knew this was coming) pointing out, with some justification, that government policy makes up only a relatively small part of your bill.

It also highlighted a recent report from the independent Committee on Climate Change that “shows that policies driving energy efficiency improvements have more than offset the cost of energy policies and have resulted in lower energy bills on average for UK households”.

So yah boo sucks to you, Centrica.

This is one of those rare occasions where I’m inclined to think that the Government has a point.

That’s not to say it should be spared any and all criticism. You can still pin some of the blame for the price rises on it because of the way the domestic energy market was privatised, and because of the subsequent inaction on the part of politicians and regulators while a cozy club of just six big providers was coming to dominate the market.

But that’s on previous administrations, and should be the subject of a longer-term debate. Right know, consumers need to understand that they don’t have to put up with it.

If they’re furious with Centrica/British Gas – and they should be because the blame for this lies at its door – they should kick Mr Conn and Mr Hodges where it hurts and walk out the door.

The two businessmen say their tariffs are towards the cheaper end of what’s out there

A quick peruse of a price comparison site should reveal that you can do better. I know this because I tried it out on uSwtich before writing this piece, putting various details in for various post codes, including my own. While not exactly scientific, British Gas isn’t all that cheap when it comes to electricity.

So there is no need to flatter Centrica’s profits, or the bloated bonuses of Mr Conn and Mr Hodges, which is what this is really all about. Other people do it cheaper.

That said, having thrown down the gauntlet to the Government and Mr Clark with their statements, it will now be most interesting to see if the Government and Mr Clark are willing to take this lying down.

Former Labour leader Ed Milliband, who originally conceived the idea of an energy price freeze that was fiercely criticised by the Conservatives, only for them to tweak the policy and put it in their manifesto as a price cap, weighed in with a tweet aimed at the Business Secretary: “Greg Clark where is your energy price cap promised at the election? Behind the back of sofa/dumped/slipped your mind?”

Actually, it’s with energy regulator Ofgem, which, according to a BEIS spokesperson, “has committed to taking prompt action, in consultation with consumer experts, to develop proposals including a safeguard tariff”.

The statement concluded with this: “We want to see rapid progress on this commitment and are ruling nothing out.”

That could be read as meaningless posturing. Or it could be read as a threat; an indication that the Mr Clark means to pick up that gauntlet Mr Conn and Mr Hodges have thrown down.

He’s going to get a hard time from more than just Mr Milliband if he doesn’t.

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