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Saturday, January 05, 2008

Fuelling poverty

News that energy provider Npower will be raising electricity prices by 12.7% and gas prices by 17.2% is not unexpected but is outrageous nevertheless.

Npower is the UK’s fourth largest energy provider and has four million customers. The price rises will take effect from today. The company claims it has been forced to increase prices because of the soaring cost of wholesale energy. It is estimated that 240,000 welsh households currently live in fuel poverty, meaning that 10% or more of their income is spent on heating their housing adequately. The average annual fuel bill of a Welsh household is already £1000 per year.

This price rise could add as much as £170 per household per year for the average consumer. While I am aware the cost to the provider has risen, it does not seem believable that prices have risen to such a high level. Last year the company made a profit of £383 million. When changes in the market happen in this way, the entire cost should not be passed on to the consumer. It is certainly the case that when the price of raw materials fall, as they did some months ago, prices remained the same and savings were not passed on. Shareholders must not be valued above the most vulnerable in our society.

This news strengthens the case for the introduction of ‘social fuel’ tariffs. At the moment some of the poorest in our communities pay the most for their fuel because of higher priced pre-payment gas and electric meters. Npower and other providers must ensure that the effect of these prices rises is minimised on those who are already paying the most for their fuel. Social tariffs would mean those who are most in need of support are those who are most supported.

These rises can only add further to the number of people in fuel poverty and directly threaten the lives of the elderly and infirm who are struggling to pay their fuel bills. There must surely now be a case for government to introduce some form of regulation of gas and electricity prices.
Maybe its time to reduce the VAT on domestic fuel. Hardly think the Chancellor will do that though. Bet he would much prefer to cash in on the extra revenue the price increase will bring into the Treasury.

I'm not with npower although I've been assured that what one of the big energy suppliers do the others are likely to copy, unfortunately.

I'm currently paying around £660 a year on gas and electric, that's with Swalec, which I find quite reasonable. That said I think I would find it a financial struggle should Swalec follow npower and increase rates by a double digit percentage.
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