UK Business to face record energy bills:
British business is facing its worst-ever rise in energy prices in the run-up to the round of contract renewals this October. Two-thirds of all industrial electricity contracts are up for renewal between now and October 1, but many firms have yet to put new contracts in place, according to energy brokers. Price hikes of up to 40% are likely, said the energy brokers. Those coming out of three-year contracts will see their rates double. The broker predicts it will be “the worst ever contract-renewal season”. Electricity contracts are renewed in two main rounds each year, one on April 1 and one on October 1, when 65% of contracts are renewed. “Those that leave it too late this time round will be looking at automatic rollover renewals as high as 150% and that is going to hurt heavy users such as manufacturers and food processors where energy is the second-highest overhead after staff.” He said he believed that many companies had yet to try and secure contracts. Electricity prices are driven by volatile gas wholesale costs. Britain already has the highest wholesale gas prices in the world after they tripled in three years. It is becoming increasingly dependent on imports, but supplies have been tight in recent winters, as imports have failed to keep up with demand. Last winter, wholesale gas prices soared when insufficient gas was delivered through the interconnector pipeline between Britain and Belgium. According to Ofgem, the energy regulator, British customers paid £1 billion more for gas last winter because of the shortages. Fears that the UK could not rely on imports were heightened when Russia briefly turned off the gas to neighbouring Ukraine, hitting supplies to several European countries. Domestic suppliers such as Centrica and EDF have been forced to raise consumer prices several times in a bid to offset the high cost of gas on the wholesale market. Last month, Centrica subsidiary British Gas announced a loss of more than £140m, citing the cost of gas. The Energy Intensive Users Group said it expected “billions” to be added to Britain's energy bill for the next year due to the expected price rises. Director Jeremy Nicholson said: “The only crumb of comfort is that the size of the increases in 2007 will be less than the increases in 2006.” 7.8.06