Energy prices on the up again
January 19, 2008
Just as the Bank of England cut the interest rate, enabling homeowners in the UK to breathe a sigh of relief, energy companies knocked consumers back down by announcing that they would be putting up the cost of energy usage again early in the New Year, and as promised one energy supplier, Npower, has already done this, with the other major suppliers expected to follow suit in the coming weeks.
A couple of years ago many households were suffering as a result of the high cost of energy usage, with energy bills going through the roof and many households pushed into fuel poverty. It therefore came as a big relief when energy suppliers announced at the start of last year that wholesale energy costs had fallen, and as a result the cost of energy usage would be coming down.
Indeed, during the first few months of the year energy suppliers slashed the cost of gas and electricity usage, and many households saw their bills come down by a considerable amount.
However, the relief was set to be short lived. Consumers in the UK spent much of last year struggling with finances in the light of a series of five interest rate hikes between August 2006 and July 2007. Everyone was keeping their fingers crossed for a drop in interest rates, and the good news of a 0.25% cut in interest rates was delivered in December by the Bank of England.
However, the good news was hampered by announcements from energy suppliers that wholesale energy prices had rocketed again and that energy usage costs would therefore be rising by up to 20% in the first quarter of this year.
In a recent announcement Npower announced that its energy prices had gone up, and British Gas customers on the market tracker tariff have also seen the impact of the rises.
One industry official recently said: “Price rises have been on the horizon for some time. Ever since British Gas and Npower announced price increases on their market trackers and Npower followed this up with a price hike on its online plan, it has been clear that prices are going to be heading north again, with the smart money on a 15% rise.”
The Chancellor of the Exchequer, Alistair Darling, has now decided to get involved with the issue of rising energy costs. Darling has arranged to meet with the chief of Ofgem, the energy regulator in the UK. The aim of the meeting for Darling is to find out more about why energy prices are rising, discuss the implications of these energy rises, and even to look at future trends in relation to energy prices.
Darling wrote to Ofgem stating: “I would be interested in receiving your assessment of gas and electricity supply and market conditions both in the UK and Europe and likely future trends. I would be particularly interested in your views on the relationship between wholesale price movements and feed-through to domestic retail prices.”
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