Energy companies are not our favourite type of company are they?
And now MP's have warned that our energy markets need a radical shake-up to tackle inefficiencies and potential price fixing!
This comes amidst warnings that we need to brace ourselves to pay significantly more for our power in the future.
Hmm, where have we heard that before?
As well as the price rise warnings, the business and enterprise committee is demanding that the government and energy companies change their approach to fuel poverty in the face of high and rising gas and electricity prices. The committee began its inquiry in the wake of the rise in domestic energy prices earlier this year, and is publishing its findings as more increases are set to kick in.
It states:
"Gas and electricity bills for domestic consumers [will] rise significantly in the near future, over and above the increases already announced this year, with serious consequences for millions of households, especially the fuel-poor."
In its report, the committee acknowledged that no one had produced any evidence suggesting collusion between energy suppliers in either the wholesale or retail markets. But it noted that in a retail market dominated by six big companies (British Gas, Scottish and Southern Energy, Scottish Power, EDF Energy, E.ON and npower) "it is easy for those players to make informed judgments about the behaviour of their competitors" and that "this alone can distort competition".
Committee chairman Peter Luff said:
"Just because we have found no evidence of collusion does not mean we have given the 'big six' energy companies a clean bill of health; far from it. It is clear there are very real problems in the energy markets at all levels, and going beyond these six companies, which need to be addressed."
The committee said that while domestic measures could not keep prices down when they were high elsewhere, it noted:
"We have concerns that the UK's energy markets are not functioning as efficiently as they should, and that UK prices may be higher than those of [other] countries."
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UK energy suppliers have been watching each other’s moves recently and EDF has been the first to act.
Without warning, EDF has announced a huge price increase for its current customers of 22% on gas and 17% on electricity.
Most energy suppliers will now be looking to make similar increases and its likely they will announce these price increases while most of us are abroad on holiday!
Even worse, this EDF price increase is unlikely to be the end of it…
Experts are certain that a further round of price increases is inevitable either late this year, or early next year, unless there is a dramatic fall in the wholesale prices for gas and electricity.
So all the downbeat talk about the expected increases in gas and electricity prices have become reality.
The high price of oil is finally catching up with our domestic gas and electricity. Energy suppliers buy gas and electricity at wholesale prices on a forward basis, and right now the forward price for gas and electricity is at record highs.
EDF Energy's move will set the trend for the rest of the suppliers, with price increases of around 20% in the days to come. Early next year (or maybe even later this year) there will be a further price increase, which could be anywhere up to 20% on top of the previous one!!
- How you can beat the energy price rise
We will need to look very hard at our energy consumption in the future, and find ways to bring it down. In the short term though, experts are encouraging energy consumers to sign up to a Capped Tariff, even if it means paying a little more for your energy right now.
- What is a Capped (PriceFreeze) tariff?
A capped price is just like every other tariff, except that the unit rates are guaranteed for a period (currently between 12 and 17 months).
This means that you still pay for what you use, but you won't have to accept price increases during the guarantee period.
As you might imagine, there is an approximate 10% premium on those rates, depending on your usage profile, but that is nothing if you consider that prices will shoot up by as much as 50% in the next six months.
There are currently six offers from a range of suppliers available; all of these can be reviewed through a comparison service.
But you must hurry to take advantage and accept the fact that you may be paying a little more in the short term, in exchange for the longer term affordability of your home energy supply!