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Energy firms face MP’s as prices are raised despite lower wholesale costs

6th November 2013 All News and Offers

Gas and electricity prices imageSome of Britain’s big six energy companies have seen their wholesale electricity costs fall over the last three years while still putting up prices for millions of households.

The figures will put yet more pressure on the firms to explain why bills and UK profits have been going up, as they appear before a influential House of Commons committee of MPs.

According to Ofgem, Npower paid an average of £59.61 per megawatt-hour for electricity in 2010. The average wholesale price fell by 4% to £57.32 in 2011 and rose by less than 2% to £58.39 in 2012. The company increased retail prices by 5.1%, 7.2% and 9.1% respectively in those years.

Similarly, EDF paid wholesale prices for electricity supplied to households of £58.16MWh in 2010, falling by 0.6% to £57.82 in 2011 and rising less than 5% to £60.68 in 2012. In those years EDF’s electricity prices to customers went up by 7.5%, 4.5% and 10.8% respectively.

Meanwhile E.ON paid £57.64MWh for its electricity in 2010, rising by 7% to £61.82 in 2011 and falling by 4% to £59.44 in 2012. It raised its power prices twice by a cumulative 20% in 2011, before cutting them by 6% in 2012.

Asked why wholesale prices appeared to be out of kilter with increases in bills, companies said network and environmental costs had been the biggest factor in higher electricity bills, which are now around £600 a year on average. However, figures from Ofgem indicate electricity network costs have only risen by £10 in each of the last four years, while green costs are rising by a similar amount. Green and social levies make up £112, or less than 9%, of the average household energy bill.

With four of the big six – British Gas, Npower, Scottish Power and SSE – announcing big price rises in the last few weeks, the companies are under increasing pressure to justify the increases, after figures from the energy regulator suggested the profit margin made by the companies per household has more than doubled from £45 to £95 over the last year. Ofgem said wholesale energy costs have gone up by just £10 in a year, while VAT, operating and other costs are up £40. The energy companies dispute this analysis and point to higher wholesale costs this winter.

Downing Street yesterday said energy companies should account for the latest round of price rises, which have averaged 9% this autumn. Energy bill increases are continuing to cause a headache for the coalition, as a new YouGov poll shows 68% of the public believes Labour’s energy price freeze is workable.