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Ofgem investigates fuel poverty

Fuel-poverty campaigners have called for quick action after a full scale investigation was launched into the electricity and gas market.

 

Energy regulator Ofgem announced it was undertaking a probe into the entire energy market on the same day British Gas’ announced profits were up 501 per cent to £571million in 2007 - just weeks after announcing a 15 per cent rise in residential prices.

 

British Gas has insisted it has a good record on combating fuel poverty and only raised prices because of a sharp increase in wholesale energy costs. But fuel-poverty charity National Energy Action estimates the latest price rise pushed around 150,000 customers into fuel poverty – defined as a household having to spend more than 10 per cent of its income on fuel.

 

Jenny Saunders, NEA chief executive, said “Fuel companies need to do much more right now. British Gas has delayed price increases for some of their vulnerable customers through their social tariff, but NEA is calling on the Government to introduce a statutory social tariff for all suppliers to protect low-income consumers.

 

“The Government needs to intervene urgently and I am calling on Gordon Brown to use the additional VAT receipts he will receive from the price increases and direct them into energy efficiency schemes for the fuel-poor.”

 

An Ofgem spokesman said it was already looking into tariffs for prepayment customers and those who do not pay their energy bills by direct debit and would report back in April.

 

It is also not ruling out a referral to the Competition Commission following its investigation, but will not publish its initial findings until the end of September.


Adam Scorer, director of campaigns at industry watchdog energywatch, said the need for such a referral was becoming overwhelming.

 

“They need to ask whether the energy market is stacked against consumers,” said Mr Storer. “Britain’s energy companies are producers or generators as well as being retailers. As producers they do very well when wholesale prices are high, as retailers they do very well when wholesale prices are low.

 

“It is perfectly true that there is volatility in wholesale energy markets. But it seems equally true that such volatility hits consumers not shareholders. Consumers will feel justified in claiming that they are being taken for a very rough ride by energy companies.

 

'The problem is deeper than any one company. The problem is rooted in a market structure that constrains the benefits of real competition to consumers. The pull of a full Competition Commission review is becoming irresistible.”

 

An Ofgem statement read: “In January, Ofgem responded to allegations in the press of price fixing by suppliers with assurances the regulator has seen no evidence of such activity and that remains the case. Now, as then, Ofgem urges anyone with evidence of anticompetitive behaviour by the energy suppliers to come forward with it.”


A British Gas spokesman said that in January regulator Energywatch said the company did more than any other company to tackle fuel poverty. They said if the five other suppliers matched its contribution of 0.4 per cent of turnover another £72.3million would be put towards helping fuel poverty.

 

A spokesman said: “Our social tariff, Essentials, is the biggest of any energy company and will help up to 350,000 fuel poverty customers get access to direct debit rates.”