UK MPs call for action on energy prices after massive price rises
Move comes as Iberdrola's SSE hits consumers with 15% hike
Britons also paid £180m for extra capacity that wasn't used, report finds
Britain's “big six” energy companies were once again feeling the heat over massive price rises as politicians from all parties called for the government to take stronger action and protect consumers on variable tariffs.
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A cross-party group of MPs have secured a debate in parliament on Thursday calling for “immediate action” to get people a better deal.
The industry has been accused of ripping off consumers after four of the six major suppliers announced eye-watering increases in standard variable tariffs (SVTs) since December, defying calls from regulator Ofgem not to increase them as there was no valid case to justify the move.
It also emerged on Monday that households had spent £180m over the past three years on spare power capacity that was never used, according to a report from Energy and Climate Intelligence Unit (ECIU).
SSE, a unit of Spain's Iberdrola, became the latest to hammer its customers, bumping up a customer's typical dual fuel bill by £73 or an average 14.9% on Monday. Gas prices were left unchanged.
Iberdrola's 2016 profits soared 12% to €2.71bn largely due to its networks business.
EDF hiked electricity prices in December but cut gas prices, amounting to a 1.2% increase.
Npower, part of Germany's Innogy and which in 2015 was find £26m for failing to treat customers fairly, announced an increase of 9.8% and last week E.ON said it was raising charges by 8.8% from April. British Gas froze prices until August.
On Sunday, the Department for Business, Energy and Industrial Strategy said ministers were ready to act where the market was failing.
In a statement to the Observer newspaper, the department said it was vital consumers were treated fairly, adding that ministers were “concerned by recent price rises, which will hit millions of people [who are] already paying more than they need to”.
“Wherever markets are not working for consumers, this government is prepared to act.”
Former Conservative minister John Penrose, one of three MPs to have secured Thursday's debate, said customers were often being switched on to expensive standard variable deals without their knowledge, once their lower tariff periods expired.
“Loyal customers are being systematically ripped off by big energy firms, and it’s just not fair. Most industries don’t exploit their best customers like this, by quietly switching them on to expensive default tariffs when their existing deal comes to an end. Loyalty should be rewarded, not exploited,” he told the newspaper.
Penrose will propose a new “relative price cap”, under which customers cannot be transferred to a new deal more than 6% more expensive than their expired one.
There was widespread surprise on the issue of spare capacity, as the ECIU said during the winter of 2016/17, despite a prolonged spell of cold weather, a busy power station maintenance schedule and low import availability from France, National Grid did not need to call on any contingency measures to keep the electricity system stable.
“The findings suggest that warnings of blackouts in the UK have been overblown, leading to potentially excessive spending on insurance policies to ensure energy security,” the ECIU said.
The Competition and Markets Authority recently found customers had paid £1.4bn a year in “excessive prices” between 2012 and 2015, with those on standard variable tariffs (70% of the total) paying 11% more for their electricity and 15% more for their gas than customers on other tariffs.
Energy companies blame rising wholesale prices and the cost of government environmental initiatives such as “smart” meters, but these have been dismissed by the regulator Ofgem, which has pointed out that the industry was slow to pass on price cuts in 2014 and it used hedging to smooth out variations in pricing.
“We don’t see any case for significant price increases where suppliers have bought energy well in advance," Ofgem said in February.