Chris Huhne attacks energy companies over price increases

Energy secretary urges consumers to hurt suppliers over increases with more companies likely to announce cost hikes The government has intervened dramatically in the row over spiralling energy prices by urging consumers to desert companies, such as Scottish Power, that impose substantial increases in the cost of gas and electricity. As concern grows that the other five major energy companies are preparing to follow Scottish Power and announce big rises within weeks, the energy secretary, Chris Huhne, told the Observer that consumers should not accept the increases “lying down” but “hurt” their supplier by finding cheaper alternatives. “Consumers don’t have to take price increases lying down,” he said. “If an energy company hits you with a price increase, you can hit them back where it hurts – by shopping around and voting with your feet.” Last week Scottish Power raised gas prices by 19% and electricity tariffs by 10%, adding 48p a day, or £175 a year, to the average daily combined gas and electricity bill of its 2.4 million customers. Now millions more consumers are expected to be hit by imminent rises as the other big suppliers follow suit. At least one of the other so-called “big six” energy companies is understood to be preparing to announce a significant price increase in the coming days, and the rest are likely to follow over the next few weeks.”There has been a lot of waiting for somebody to go first. I wouldn’t be at all surprised if we didn’t see the other five big energy companies putting up their prices pretty quickly. And I couldn’t rule out us doing it soon,” said a source at one of the big six. Huhne’s intervention is the latest sign of concern in the coalition about the impact of rising prices on consumers as they face what Bank of England governor Sir Mervyn King has called the most prolonged decline in living standards since the 1920s. Ministers are also understood to be seeking powers to force companies to reveal to every customer on their bills whether they are on the cheapest tariff, amid concerns about lack of transparency. In a further attempt to ease pressure on prices by increasing competition, the energy secretary will this week announce new measures to make it easier for smaller companies to compete in the market by easing the costs and red tape that prevent them from doing so. Around 99% of people currently get their energy from one of the big six. “Right now, only one in five people switch suppliers. I want to see more switching, more competition and more companies in the market,” Huhne said. “The big six only have a few minnows snapping at them, who are kept artificially small. By scrapping red tape for small players they can become serious challengers and help keep bills down.” The move comes as chancellor George Osborne prepares to defend his handling of the economy in his annual Mansion House speech on Wednesday. Official figures to be published on Tuesday are expected to show that inflation remains above 4%, more than double the government’s target, and adding to pressure for a rise in interest rates. Rocketing utilities bills will pile on the pain for households already struggling under the weight of public spending cuts and tax increases, including January’s VAT rise. Analysts are now warning that if the other energy suppliers follow Scottish Power, it could cause a fresh spike in inflation later this year. “Since prices usually jump in August anyway, following the end of the summer sales in July, we could be facing a sharp jump in the inflation rate in late summer which will take it well above 5%,” said Peter Dixon, chief UK economist at Commerzbank. A string of retailers have reported that sales on the high street are flagging as consumers tighten their belts. Research by insurance group Axa suggested last week that up to 20 million people have cut back on spending this year. A spokesman for Consumer Focus added: “The big six tend to hunt in a pack. When one goes, they all go. Consumers need to brace for across-the-board increases. On past experience the energy providers tend to introduce very similar price increases. We are concerned about competition in this market.” Scottish Power blamed last week’s price rises on soaring wholesale gas and oil prices, which have risen by nearly a third this year on the back of Middle East unrest, the weak dollar and continuing demand from emerging countries. Further measures to address a lack of competition in the market are expected to be announced by energy regulator Ofgem. The changes, which could be announced as soon as this week, are expected to force the big six – which have their own power stations – to auction up to a fifth of their generated output on the open market to make it easier for new players to enter the market. The new measures are also expected to ensure that the huge array of tariffs – which has grown by 70% since 2008 to nearly 350 – are dramatically reduced so that customers can more easily compare prices between suppliers. Ofgem first announced these proposals in March, following a four-month investigation. The regulator gave the big six – Scottish Power, nPower, EDF, Scottish and Southern, E.ON and British Gas – until 1 June to “engage constructively” with its proposals or face a referral to the Competition Commission. Energy industry Energy bills Consumer affairs Household bills Chris Huhne Energy Gas Toby Helm Tom Bawden Heather Stewart guardian.co.uk

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