UK consumers to face record electricity bills this winter

Consumer groups in the UK are up in arms against steep price hikes that will leave households foot near-record gas and electricity bills this winter even as wholesale prices are only half the level of 2008.

In a move surprise announcement last week, British Gas that it would increase its gas and electricity prices by an average of 7 per cent, although for many customers bills rise by as much as 10 per cent. Scottish & Southern Energy (SSE), which is known to be the last company to raise prices had earlier announced an unwelcome 9.4-per cent addition to bills.

Analysts say if past experience is any guide, consumers could expect further hikes from the E.ON and Scottish Power, with only one of the major power firms, EDF, ruling out increasing prices this winter.

According to British Gas it has been forced to hike prices because "the wholesale cost of gas for 2011 is 25 per cent  higher than for 2010".

However, consumer groups point out that wholesale gas prices fell sharply in 2009 and have not risen to anywhere near their previous levels. Meanwhile, profits at the utility companies surged.

According to Centrica, which operates British Gas, its profits were likely to be above expectations, hitting £2.2 billion. The company's shareholders have enjoyed an 18 per cent gain in the value of their holdings this year alone, in addition to dividends.
 
Consumer organisations point to the figures as proof customers are being treated unfairly. They say in July, Nick Luff, group finance director, said of British Gas's high half-year profit figures, "Commodity costs were lower, despite the higher volumes and that reflected the low wholesale prices and led to the unusually high margins we had in the first half … The UK downstream was the main driver [for high profits], helped by the cold weather and the low wholesale price."