Home Energy Price Cuts:

Catalyst Commercial Services Ltd — Thu, 12 Feb 2009 00:14:52 +0000

Millions of utility bills are set to fall after four energy suppliers pledged to follow cuts by British Gas and Southern Electric. Bosses from the foreign-owned suppliers E.On, RWE, npower, EDF and Scottish Power were embarrassed into declaring they will cut charges after MPs demanded to know why they have delayed following the British-owned companies’ lead. E.On retail director Jim Macdonald told the energy select committee today the chances of an imminent cut are “increasing rather than decreasing”. Martin Lawrence, supply director of EDF, said the firm is ‘actively looking’ at cuts. Nick Horler, chief executive of Scottish Power, said: “We are likely to move soon.”

British Gas slashed its own prices for gas by 10 per cent this month – now foreign-owned firms are likely to follow Guy Johnson, director at npower, said it is cutting ‘social tariffs’ to vulnerable customers. The attack came from the boss of one of the two major British-owned power suppliers during tense exchanges with MPs who are investigating sky high bills.

British Gas has announced a 10per cent price cut on gas, while Scottish & Southern Energy (SSE) is cutting electricity by 9per cent and gas by 4per cent.

Today SSE’s combative chief executive, Ian Marchant, said he could not understand why these foreign firms have not announced price cuts. ‘One of the questions that occurs to me is why it is the two British quoted companies that have announced (price cuts) first and the four Continental Europeans that haven’t,’ he said. ‘I don’t know whether that is significant, but it is an interesting question.’ He added: ‘I am sitting here torn. I hope they don’t reduce prices because that means I can win customers. But that is not the answer for UK plc.

‘So I hope they get off their backsides and do something in the next few weeks.’
Average household gas bills rose by 50per cent in 2008 and electricity by around a third. The net effect was to add around £400 a year to the cost of heat and light. Ian Marchant has attacked foreign-owned firms for not cutting prices The wholesale price of gas and electricity has fallen by 40per cent since the peak last summer. However, UK customers are paying record tariffs.

Mr Marchant said it is his hope that the entire industry will cut bills at least once in the next few weeks, with a further reduction later this year. The SSE chief also attacked the foreign power giants for operating secretive accounting systems that make it very difficult to see how much profit they are making in the UK, and how much tax they are paying here. Both British Gas and SSE publish information on their profit margins. However, some of the foreign firms do not even declare a UK profit figure. The British Gas chief executive, Phil Bentley, also took up the attack on the foreign rivals. He pointed out that German, French and Spanish firms have been able to buy UK suppliers, power stations and storage. However, British firms cannot do the same in these other countries.
He complained that some foreign firms had been exporting UK gas to Europe throughout the winter via an Interconnector pipeline under the English Channel, despite high demand here.

‘In the last 120 days, the interconnector has been exporting gas from the UK into Europe for 100 of those,’ he complained. The net effect is to keep wholesale prices in the UK higher than necessary. MPs on the Energy & Climate Change Committee, chaired by former Government minister, Elliot Morley, challenged company chiefs from the foreign firms to cut their prices. Senior executives from the firms indicated there would be announcements ‘soon’. However, that did not satisfy the committee and one MP suggested the clamour to hit the industry with a windfall tax is likely to grow unless there is action.

Labour MP, Dr Des Turner, said: ‘The public has the perception, rightly on wrongly, that companies are squirrelling away unjustifiable levels of profit…There is a great deal of public support for a windfall tax.

‘Given that you are so coy about protecting your bottom line and unwilling to tell us why it is you can’t reduce prices now, rather than some optimistic time in the future, can you give an honest rebuttal of the call for a windfall tax?’

The firms insisted profits are vital to help pay for new power stations, including nuclear and wind farms, to ensure the lights stay on. Eon commercial director, Jim McDonald said while wholesale prices are down compared to last summer, they remain 75per cent above the figure in February 2007.

‘We will do our best to reduce our prices as soon as we can do,’ he said. Guy Johnson of Npower said UK gas prices were the cheapest in the EU, while electricity prices were the among the lowest. He said the company is spending millions subsidising home insulation for customers and ensuring those in need are moved to cheaper social tariffs. Chief executive of Scottish Power, Nick Horler, said the firm is likely to cut prices soon.
While Martin Lawrence of EDF said: ‘We are actively looking at prices and expect to move our prices soon.’

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Home Energy Price Cuts:

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