UK electricity prices are on the march (again). A storm of protest has broken forth today as one of the UK big six British Gas is raising electricity but not gas prices by up to 12.5%. All the other energy companies (almost) have stuck up prices over the last year and there are concerns they may follow again. Everyone is blaming everyone else. British Gas blames network upgrades, smartmeters and renewables for increase. The government say its not their imposed programmes but the companies fault.
As per usual its very hard for us customers to disentangle what is going on with UK electricity prices. We can draw a number of general points though.
- British gas has to be fair to them not put prices up for 4 years.
- The eco stuff is onerous particularly the energy efficiency programmes. The small providers are exempted below a certain number of customers. These companies try to stay below this limit (something like 120,000) for this reason. The British Gas boss wanted a level playing field this morning on the radio with his competitors not being exempted*. However the big six make big profits and the limit is still fairly low. Its there for a reason to encourage competition by not loading too much stuff on new market entrants. The eco effeciency stuff is really important and is the only way of limiting prices in the future.
- This brings us to competition. Privatisation has not worked out in keeping prices low as was promised. It did at first with the companies getting the benefits of the “dash to gas”. Yes you can blame external factors such as the run down of UK gas supplies and a switch to renewables and huge increase in the oil price in 2008. (Its still surprising how much this last factor has affected electricity prices.) Nevertheless we were told competition would work and its not working very well (although the small suppliers are somewhat cheaper). The different tariffs and ranges thereof are labyrinthine.
- One thing British Gas are not blaming increased UK electricity prices is the wholesale price of electricity. This has fallen by their own admission. With 25% of power coming from renewable sources it would seem unfair not to give renewables credit in helping to hold prices down. Once a renewable asset is in then the output is pretty much fixed and predictable going forward. Gas prices meander about all over the place.
The government were promising some kind of cap in their manifesto. The small majority means this like so may other promises has been trashed. It looks like this problem is here to stay. The only mitigating factors are British Gas are going to subsidise their poorest customers a bit to protect them from the increase. Buy our book which has energy efficiency tips in it.
Neil
* he also said he wanted the government to legislate to get rid of standard variable tariffs although this begs the question as to why British Gas don’t voluntarily get rid of them themselves.
P.S. I must be on of the few people in the UK whose gas and electricity prices will have fallen. However this until December and is to keep me with my energy company after they have switched back office suppliers. I’m expecting a big increase then.