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Energy price hikes loom over industry

British Gas owner Centrica has stated the wholesale price of gas and power for next winter is around 25 per cent higher than last year.

“Market conditions for our residential energy supply business are significantly more challenging than in 2010,” it said.

A spokesman for Centrica said that the company has made no decision yet about whether to increase tariffs.

It is hopeful that increased profits from its exploration and production divisions will cover lower profits from its consumer-facing business.

The decision by Chancellor George Osborne to increase the supplementary tax on oil and gas production from 20 per cent to 32 per cent in this year’s Budget will offset the benefit of higher commodity prices, it said.

The announcement raises a number of issues for the HVAC sector. “It appears that Centrica is softening up its customers for a price hike,” said HVCA head of sustainability David Frise.

“Undoubtedly other utilities will follow suit, as the nuclear situation in Japan and Germany has put real pressure on energy prices.”

The inefficiency of UK housing stock leaves homeowners at the mercy of energy pricing volatility, he continued.

Industry can assist by rapidly improving the thermal efficiency of existing buildings, but our sector lacks credibility, said Mr Frise, because building performance still does not match promise.

“We must start rewarding people based on actual performance. Only then will we start to see energy costs coming down significantly for all building users.”

BDR Thermea UK and Ireland chief executive officer Mark Kelly said rising prices will increase poverty, further exacerbated by the reductions in Warmfront funding. “The government needs to act now to help fuel poor households improve the energy efficiency of their homes.”

The options available to the government include lowering the rate of VAT for boiler replacement and reintroducing last year’s boiler scrappage scheme, he said.

While sympathising with energy consumers, others highlighted the potential boost for renewable energy.

Remeha Commercial director of commercial products Mark Northcott said the announcement highlighted the opportunity to invest in low to zero-carbon technology, avoiding CRC fines and taking advantage of RHI payments.

“Although the fuel costs are hurting us all, if it does lead to a faster reduction in carbon and fuel wastage you could argue that it’s an ill wind that blows no good.”

David Shaw, business manager at CHP manufacturer Baxi SenerTec, said: “It should stiffen the resolve of our industry to improve energy efficiency and continue developing alternative sources of heating and power.”