MILLIONS of households across the UK are facing further increases in their fuel bills after British Gas-owner Centrica signalled it may raise its prices.
A leading City firm predicted tariff rises of up to 18 per cent in the coming months after Centrica revealed that wholesale gas prices for the second half of this year were double those of a year ago.
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uSwitch.com said that the average household bill would rise by about 10 per cent, or roughly £105, by late summer, with a further 15 per cent, or £173, increase in January 2009.
“It’s pretty clear that something has to give and that household energy prices are going to be shooting up again this year,” said Tim Wolfenden, head of home services at uSwitch.com
Centrica said it would take “action to deliver reasonable margins” and said its profits would be “materially lower” in the first half of 2008, despite British Gas price rises.
In January, Centrica increased bills by 15 per cent for 16 million British Gas customers, warning that its residential supply arm would have been loss-making otherwise.
Graham Kerr, of energywatch Scotland, said there was no shortage of gas yet consumers were being bombarded with dire predictions of huge price rises.
He said: “There is a simple choice for government and regulators: meekly accept that ever-increasing gas prices are inevitable or challenge the market to provide information on every aspect, from production levels to actual commodity trades to retail prices and profits.
“If it’s not about supply and demand, its something else and we need to know what that something else is.”
MPs will hear evidence next week of what’s wrong in the energy market, amid concerns that the structure of the UK markets does not promote effective competition. Britain’s five other major domestic energy suppliers – E.ON, Npower, Scottish & Southern Energy, ScottishPower and EDF – also raised gas and electricity prices this year.
Centrica’s increase took the firm’s average annual dual-fuel bill to £1,055, up £143. Those paying by direct debit saw bills go up an average of £131 to £968.
The increases contributed to inflation rising beyond the Bank of England’s 2 per cent target. A further increase will be another blow to households as they battle higher motoring, food and mortgage costs.
Dr Kean Birch, a research fellow in the department of economics at Glasgow University, said consumers would continue to feel the pinch as we are now a net importer of oil and gas – that is, we depend on other nations for our supply.
“We are becoming more dependent in the UK on oil and gas imports because North Sea oil is running out; it’s becoming more expensive to extract it. We used to be a net exporter in the early 1980s, but now we’re a net importer.”
Economists say households in other European countries may be less susceptible to price increases as their oil and gas markets are subject to greater state regulation. Analysts also believe that the newly-developing economies such as China and India have pushed up demand for oil and gas, with the obvious knock-on effect for energy prices.
Last month, senior Norwegian energy executives warned the government that they do not see the UK as a priority market. Norway supplies about one-fifth of the gas used in this country.
With North Sea reserves dwindling, the UK is facing having to import about half of its gas from countries such as Norway and Russia by 2010.
Wholesale energy costs have been rising in the UK due to record oil prices, rising demand in Asia for liquefied natural gas and insufficient supply from continental Europe. A weak pound against the euro has also added to the price pressure.
Historically, the UK has benefited from lower gas prices during the summer due to domestic overproduction and easily available imports. But with hydrocarbons such as gas and oil now viewed as a scarce resource, there has been more intense competition for supplies from the continent.
Peter Atherton, an analyst at Citi, said he expected Centrica to raise retail prices by up to 18 per cent later this year, depending on how it covered losses in its industrial and wholesale arm, which supplies gas to large-scale customers.
Sam Laidlaw, Centrica’s chief executive, said by 2015 the UK would be importing 75 per cent of its gas, up from a third this year. He said: “We now have to pay the world prices rather than the price to clear the marginal cost in the North Sea.”
The full article contains 782 words and appears in The Scotsman newspaper.
