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No more cheap energy: How do we end fuel poverty?

By Chris Marshall | 12:29:35 | 28 July 2008

By any standards, 20% is no small price rise. But according to EDF Energy, this was what was needed for it to keep up with its own sky-high costs.

It is moves like this, compounding rising household costs that are pushing more and more people into poverty, that prompted a committee of MPs to investigate the big energy companies.

Not surprisingly, the resulting report states that the era of cheap energy is behind us. It warns: ‘Expect gas and electricity bills for domestic consumers to rise significantly in the near future, over and above the increases already announced this year, with serious consequences for millions of households, and especially the fuel poor.’

The whole thing stinks of hypocrisy, as the report notes: ‘While the ‘Big 6’ have cited rising wholesale prices as the reason for collectively increasing prices in 2008, it required a ‘naming and shaming’ by Ofgem for two companies to reduce their retail prices in early 2007, when wholesale prices were falling.’

Although all of the top firms keep their energy prices within a tight bracket, the enquiry found no specific evidence whatsoever that they had colluded to keep energy prices high.

However, as the report notes, active collusion is not necessary when there are only a handful of firms and they can make informed judgments about what their peers are up to, distorting competition.

The cross-party MPs that published the report argued for a windfall tax on the profits of energy companies. This could be used to help the increasing numbers of people struggling with their energy bills – a group which looks likely to balloon this Winter once the other energy firms follow EDF’s lead.

The report also says that the regulators should oppose any further consolidation in the sector, as competition is low enough as it is.

But what else should the government do? The energy companies’ selling practices are one place to start. Ofgem, the energy regulator, is investigating alleged mis-selling of energy contracts by npower, another of the ‘Big 6’. Alleged tactics used the by the company had included exploiting customers with a poor command of English.

What are your experiences of the big energy companies? And what can we do to force down prices and eke out a bit of healthy competition?

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Comments (8)

David Stringer - But Gas isn't Oil!

14:54 | 28 Jul 2008

I suspect the main reason is that many UK based generators have accepted medium term gas purchase contracts with a linkage to oil price. They may have done this when oil prices were lower but the linkage is very damaging now. The reasons why oil prices rise (linked to transport fuels) are not the same as the supply/demand drivers for gas so the current position is a self-fulfilling prophesy. The purchasing depts should be kicking themselves rather than their customers.

June Ann Freeman - Nationalisation

16:28 | 28 Jul 2008

The folly of nationalisation, as a universal cure-all , are coming home to roost.

Certain industries should never be in the private sector as it goes against the national interest. This is just one of those.

When the electricity and gas companies were making huge profits, these were going off shore to line the pockets of their foreign owners.

Now the government want to take the line of least resistance, claiming no control over the industry.

Once against, Joe Public pay the price for years of fiscal and governmental mismanagement.

Andrew - Competition?

16:33 | 28 Jul 2008

There is no real competition in the energy sector. When one jacks the price up the rest follow relatively quicky and given the time it takes to switch providers moving makes little difference in the end.

How about setting up a non-profit govenment owner energy company to provide effective competition and to break the cartel.

Clifford J. Wirth - Gasoline Heating Oil Emergencies

17:28 | 28 Jul 2008

Gasoline and heating oil prices will soon skyrocket:

According to energy investment banker Matthew Simmons, global oil production is now declining, from 74 million barrels per day to 60 million barrels per day by 2015. During the same time demand will increase 14%.

This is equivalent to a 33% drop in 7 years. No one can reverse this trend, nor can we conserve our way out of this catastrophe. Because the demand for oil is so high, it will always be higher than production; thus the depletion rate will continue until all recoverable oil is extracted.

Alternatives will not even begin to fill the gap. And most alternatives yield electric power, but we need liquid fuels for tractors/combines, 18 wheel trucks, trains, ships, and mining equipment.

We are facing the collapse of the highways that depend on diesel trucks for maintenance of bridges, cleaning culverts to avoid road washouts, snow plowing, roadbed and surface repair. When the highways fail, so will the power grid, as highways carry the parts, transformers, steel for pylons, and high tension cables, all from far away. With the highways out, there will be no food coming in from "outside," and without the power grid virtually nothing works, including home heating, pumping of gasoline and diesel, airports, communications, and automated systems.

This is documented in a free 48 page report that can be downloaded, website posted, distributed, and emailed: http://www.peakoilassociates.com/POAnalysis.html

I used to live in NH, but moved to a safer place. Anyone interested in relocating to a nice, pretty, sustainable area, good climate with much rain and good soil?

Alan Wilson - Blame European Gas monopolies for todays high gas prices

20:32 | 28 Jul 2008

The origin of todays sky high gas prices which are linked to oil is the original contract agreed between Russia and Ruhrgas in which imported gas from Russia was pegged to heating oil prices. Ruhrgas had a gas distribution monopoly in Germany and could confidently pass on any price increases. They later contracted with the Norwegians on the same basis, and effectively established this as the benchmark gas contract structure. It is no accident that oil compenies had a significant shareholding in Ruhrgas, and in the gas fields in the Norwegian sector.

David Chapman - Contracts

00:35 | 29 Jul 2008

1. Outlaw the linked oil-gas price structure for all future gas supply contracts.

2.Threaten and if necessary carry out Nationalsation of gas supply and distribution [ I am sure June means privatisation]

3.Embark on a large scale Nuclear program.

A good start if these were enacted

ALAN - energy

12:22 | 29 Jul 2008

why not bring the enery sector back into goverment owened after all other countrys own them any way , then they could use our oil and gas or sorry i forgot we gave it all away. or make the gas companys build more storage capacity after all that is the excuse i have seen writen many times .dont ask them to build the storage capacity just make them or take the profits of them

mark caines - Taxation.

12:38 | 29 Jul 2008

So our MPs think that they can improve the cost of energy by slapping a windfall tax on the energy companies.

Since when has taxing a company more led to decreased prices to the consumer? Our MPs are idiots, bowing to media campaigns without understanding the implications of there actions.

I suppose that the extra taxation of North sea oil a few years ago had no effect on investment in the North sea production either?

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