British Gas – a price hike too far

By Meg Hillier MP, shadow energy secretary

Today’s announcement about British Gas price hikes is another body blow to the British Consumer.

Gas bills will rise from August 18th by an average of 18% and electricity bills by an average of 16%. The change will hit nine million households with the average dual fuel customer paying an extra £190 a year.

The size of the increase with no warning leaves bill payers in a spin. The government is refusing to act. David Cameron has broken the promises he made before the election.

On the doorsteps of my constituency I’m hard pressed to find anyone who isn’t feeling squeezed; for many the pips have been squeaking for some time.

The insouciance of the Secretary of State for Energy Chris Huhne underlines a detachment from the reality of life that characterises his department. The Prime Minister made promises about what he would do to tackle the issue if he got into power. Now he’s in No 10 and he is doing nothing.

Questioned by me in parliament on July 7th, Chris Huhne listed all the measures that he tells us will tackle the problem. But rattling off a list of meetings with small providers, an Ofgem review and the reform of the electricity market just underlines the feeling of disconnection. The bill to reform the electricity market won’t even be before parliament until summer of 2012. It then has to be debated and become law with implementation after that. 2014/15 is too long for customers to wait. And the much vaunted energy bill has been shelved as it drops down the government’s list of priorities.

Chris Huhne just doesn’t get it. People are struggling now. This Tory government has an economic policy which is squeezing households so tight they have nowhere to go when another commodity increases in price. No-one would try and pay off their twenty-five year mortgage in five years; but the government by doing this with national debt is squeezing individuals so that it really hurts.

In my own east London constituency the ‘pay day loan’ companies do good business. Many people prefer an electricity key because at least that way they know they can’t spend more than they will be able to afford to pay at the end of the month. Many of the people I know in this situation would not be considered fuel poor. They are just people working hard to make ends meet. Surprise price hikes on this scale leave them with nowhere to turn.

But it’s not just the poorest who suffer. The higher housing costs of people in private housing and the fare increases on train and London transport (a 44% hike in cash bus fares in London, for example), along with the future withdrawal of child benefit mean that the middle is squeezed too.

Next week the government unveils its white paper on how to reform the electricity market. It has got so bogged down in complicated legal mechanisms that it’s taken its eye off the ball: the impact on households.

Labour is laying out some basic principles for reform: consumers need to be at the heart of any changes, both domestic and business; there needs to be greater opportunity for new entrants to the market and there needs to be transparency in where costs fall – particularly for the companies which are producers and retailers.

British Gas and its parent company Centrica have sent some coded messages over recent weeks. Chief executive Sam Laidlaw talked about the need for an honest debate with the public about future energy price rises. He cannot lay these current increases at others’ doors but he is right in one respect: we need to have a public debate about the future of energy and prices in the UK. The growth of renewable energy sources, vital for the UK to meet our challenging carbon reduction targets, the costs of imported fossil fuels all contribute to future price rises.

We also need to be cleverer about demand management. We could stimulate a market for goods which use less energy; for tariffs which reward energy use at times of typically low demand and other demand reduction measures. We need to create a climate which helps people reduce energy use. The Government’s silence on smart meter roll-out is another example of its lack of urgency on this issue.

In the meantime the Competition Commission needs to look into the Big Six energy companies. This can only benefit all parties. Public trust in the energy companies has sunk so low that only an external investigation can hope to restore that. The Big Six should not fear this – if they are as keen to be open, honest and transparent as they all tell me they will welcome an outside view.