Utilities: Powergen turns up heat on prices

Utilities: Powergen turns up heat on prices

Threatened higher fuel bills became a reality for millions of households this week after Powergen announced it was raising prices from the end of next month.

The German owned company said this week it is upping gas prices by 11.9% and electricity prices by 7.2% - both increases will take effect on August 31. Powergen is Britain's second biggest supplier, with more than 9m UK customers.

Customers on Powergen's Age Concern tariff will be particularly hard hit, as in March their electricity bills went up by 8.9% and gas bills by 9.6%. Combined, these increases will result in an Age Concern customer's bill rising on average by more than £139 in less than six months.

"The UK is in an era of rising energy prices and we, like all energy suppliers, are under tremendous pressure as the prices we pay for electricity and gas reach all time highs," says Nick Holler, managing director of Powergen Retail.

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Other companies are likely to follow Powergen's lead. Last month, British Gas's parent company, Centrica, warned its customers to expect a double-digit increase. Powergen says it has been forced to raise prices because wholesale electricity prices had risen by almost a quarter since last November, while gas prices were more than a third higher.

Gas and electricity watchdog Energywatch expressed concern that a new round of increases was on the way. "They are saying this is about wholesale price rises. But the thing that concerns us is that across the industry we see companies pass the risk of those price rises on to customers."

Alongside news of the price increases Powergen said it was setting aside £18m to help its most vulnerable customers. It said it was offering all customers discounted cavity wall insulation which, it said, could save households up to £160 a year.

Mr Horler says Powergen decided to increase prices during the summer at a time when customers' energy usage was lower.

"By making a smaller increase in the summer rather than a larger increase later this year we can help our customers ahead of the winter when they use energy most. Together we can do this by making their homes more energy efficient and by offering specific support to vulnerable households."

Karen Darby, the head of price comparison and switching service SimplySwitch.com says: "Powergen is the first energy company to announce a major price increase in some time and they won't be the last. Over the course of the next few months, we are expecting many energy companies to follow suit and increase their prices well above the rate of inflation. Meanwhile rival operation TheEnergyShop.com says it expects the average household would see energy bills rise by between £80 and £95 a year before the end of the year. That would mean bills would have increased by £200 a year since January 2003.

"We have been warning consumers for some time now that substantial energy price increases are on their way and today's announcement from Powergen means that they are coming sooner rather than later.

"Cap your energy costs while you still can. Compared to where energy prices are heading in the next two to three months the current deals are very good value, but we expect them to be withdrawn shortly. If you don't act now, you'll miss the opportunity," says chief executive Joe Malinowski.

He is recommending consumers switch to Scottish-Power Online which is price capped until May 2007. According to his calculations, a family of four living in a three-bedroom semi-detached house in the East Midlands region - who are currently supplied by British Gas for their gas and Powergen for their electricity - will save £115 a year by switching to ScottishPower Online, assuming BG does increase its prices.

Guardian Unlimited © Guardian Newspapers Limited 2005