Pre-payment Meters a Good Deal???

BBC Business News - Energy companies 'exploit poor'

Energy companies have been accused by an industry watchdog of exploiting some of the poorest people in society. Customers with pre-payment meters are paying hundreds of pounds more for electricity and gas than those with access to the cheapest tariffs.

According to Energywatch, some people cannot take advantage of lower tariffs because they do not have bank accounts.

Customers on the meters are charged an average of £195 more a year than those paying by direct debit, it says. In some cases, customers using meters have been found to pay as much as £304 more a year.

The cheapest tariffs are typically available to those who apply online and pay by direct debit.
'Morally bankrupt'

Many consumers prefer to use pre-payment meters to pay for gas and electricity.
It allows them to budget and to pay as they go along rather than face an unwelcome bill. But others have no option.

"That they should ramp up the rates and exploit those with no access to alternative payment methods is morally bankrupt," said Energywatch chief executive of Allan Asher.

The industry regulator Ofgem says companies install pre-payment meters when a customer has difficulty managing their energy bills. They are common in rented accommodation and holiday homes. There are 3.5 million electricity and 2.2 million gas pre-payment meters in Britain.

More meters

Energywatch claims that the number of meters being installed each year has been rising due to soaring energy bills.

Some 580,000 pre-payment meters were installed in 2006. Energywatch claims that 63% were installed by companies to recover debts, which would limit the ability of those households to switch to cheaper suppliers or payment methods. The industry also argues that pre-payment tariffs tend to be higher because of the expense of maintaining the meters and the payment system.

Ofgem calculates that the additional cost of providing gas or electricity by pre-payment is £85 per household.

But according to Energywatch, even after these costs are taken into account, the industry is making close to £300m a year in revenues from customers on pre-payment meters.

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Energy bills set to increase despite oil price fall, warns Scottish and Southern

Scottish and Southern Energy yesterday gave the clearest warning yet from leading home energy suppliers that consumers must brace themselves for a new round of gas and electricity price increases.

SSE said that despite a sharp dip in the oil price in recent weeks, it was becoming increasingly difficult to hold the prices paid by its nine million customers at current levels. "The full extent of the energy shock with which the entire global economy is having to contend had been well-documented and its full impact on prices for electricity and gas in the UK has still to be felt," warned Ian Marchant, the utility's chief executive. "We are continuing to resist the pressure to put up prices for domestic customers but it is becoming more difficult by the day."

The extent to which home energy providers' margins have been squeezed in recent months by the soaring cost of wholesale gas was underlined by a warning from SSE about the likely size of its profits in the first half of its financial year, which ends 30 September.

In previous years, SSE made the majority of its annual profits during its first half, but Mr Marchant warned this year's interim results announcement would be more downbeat, with profits in the first half expected to be "substantially lower" than in the same periods of 2006 and 2007.

Nevertheless, the company believes it will meet profits expectations for the full year, suggesting that it is planning on the basis of higher prices from the autumn onwards. Increases at SSE are likely to be broadly in line with similar price rises now expected from rival energy suppliers, with independent analysts predicting last week that gas bills will go up by 60 per cent in the next 12 months. Ann Robinson, director of consumer policy at uSwitch.com, the price comparison site, warned: "Coupled with the credit crunch and the ongoing battle to make their money go further, consumers should steel themselves for a winter of discontent."

Another round of price rises will nonetheless disappoint customers, given that the oil price has fallen back by almost 13 per cent to around $127 a barrel today, from a high of close to $148. However, the utilities argue that most of the rise in oil prices this year has not yet been reflected in home energy bills. Wholesale gas prices have also fallen less sharply than oil, correcting by around 11 per cent over the past six weeks.

Joe Malinowski, managing director of The Energy Shop, the energy market analyst, warned there was little chance of a reprieve for customers. "The gas price falls we've seen are nowhere near enough to prevent one or possibly two more rises in bills," he said. "The falls have come far too late and from too high a level to make a significant difference."

Mr Malinowski believes energy companies, including British Gas, will begin announcing price rises within the next fortnight. "Our best hope is that we get a modest rise now and probably another modest rise later on, rather than one big increase straight away." Energy analysts believe the oil price would have to fall back to around $100 a barrel for energy bills to be sustainable at their current rates. Another round of price increases will also be a major blow to the Bank of England, which has blamed energy bill costs as a major contributor towards its failure to keep inflation within 1 percentage point of its 2 per cent target.

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Soaring bills leave families with just £50 a week

By Harry Wallop Consumer Affairs Correspondent
----------------

THE rising cost of living has left the average family with less than £50 to spend each week on anything other than essential household bills.


The average household with a home and car has £2,427 a year to spend on child care, clothes, holidays, household repairs, credit card interest, telephone calls, medicines, alcohol and eating out.


This equates to £46.67 a week after bills, taxes and the mortgage have been paid. Statistics show that costs have soared over the past year at a far faster rate than wages, leaving most families unable to afford many key items.


The Daily Telegraph has analysed household costs, including food, utilities and insurance bills, for a family with two children, a £150,000 mortgage and a car. Costs for this typical family total £24,665 a year as a result of significant increases in gas and electricity bills, record petrol prices and rising food prices. This compares with an official estimate of the net average household income, which totals £27,092, after benefits have been received and taxes paid.


This is taken from the Office for National Statistics’ family spending survey 2007, published last month. It includes sources of income from all members of a household, including wages, investments, benefits and tax credits, minus taxes and nation


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British Gas bills may rise by 30%

British Gas will tomorrow warn householders that their annual gas bills may jump by as much as 30% next winter.

The huge rise, the result of soaring wholesale gas prices, would push the average household energy bill to more than £1,200 a year.

The company, which provides gas to nearly half the nation's homes, said it was being forced to put up prices because its retail gas business would otherwise plunge into the red.

Forecast wholesale prices for next winter put gas at 85p a therm compared with 47p last winter.

The coded warning of more increases in gas prices will come in a trading statement tomorrow, just five months after parent company Centrica reported annual profits of £1.9bn.

It will come as yet more unwelcome economic news for the Government, which is battling to fight inflation in the face of soaring domestic energy bills and petrol at £5 gallon.

The wholesale price of gas is rising because Britain is forced to import more rather than relying on North Sea supplies.

Last year the UK imported 27% of its gas needs, but this figure is expected to hit about 40% in 2008.

Centrica is considering buying a third share of a giant £2.5bn wind farm in the Thames Estuary.

Shell is selling its stake in the London Array project seven miles off the north Kent coast, which when completed will be the biggest wind farm in the world, with 300 turbines.

Sarwjit Sambhi, Centrica's director of power generation and renewables, said: 'We would certainly be interested in acquiring this stake.'

£10bn nuclear bidding battle

Spanish energy giant Iberdrola, owner of ScottishPower, and Suez of France will this week launch rival £10bn-plus bids for British Energy that are expected to top Friday's all-cash offer from EDF.

No details have been given of EDF's proposal for Britain's only nuclear power operator, but it is understood to be less than the 701p-a-share at which BE was trading at the end of the week.

Centrica, parent company of British Gas, had been attempting to muscle in on the EDF deal, but has been left out in the cold.

British Energy is refusing to comment on the EDF proposal and is likely to keep quiet until it has received detailed offers from other energy companies. A final decision is not expected until June.

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Gas bills to rise by more than £400 this year

Household gas bills could rise by more than £400 this year, as British Gas today signalled another price increase of 20 per cent.

The rise - likely within a matter of weeks - will take average domestic gas and electricity bills above £1,200 after a 15 per cent price rise in January.

Consumer group uSwitch believes households may need to prepare for price rises of as much as 46 per cent for the year as a whole.

"Including the 15 per cent rise in January, the worst case suggests bills could rise by as much as £415 in one year," said uSwitch director Tim Wolfenden.

"We believe there could be a bunch of rises by the end of the year. We foresee increases in August and September, but then a real killer additional rise at the end of the year."

British Gas's parent company Centrica left customers and shareholders at its annual meeting in London today in little doubt they should be braced for far larger bills.

The company said the global oil price, which has soared to $125 a barrel, has also seen the price of gas rocket. British Gas says the amount it has to pay for gas to supply UK households means it can no longer make the profit its City shareholders demand.

"We will take necessary action to deliver reasonable margins in the retail business," Centrica chairman Roger Carr was due to tell the meeting.

The wholesale price of gas has been rising throughout the spring, and the outlook is not getting better.

Forward prices are nearly double what they were last year, with suppliers having to pay up to 85p a therm next winter compared with 48p in the winter just gone.

Asked when a price rise might come, a British Gas spokesman said: "That depends on what happens to the oil price, which has been highly volatile." The spokesman refused to be drawn on how much British prices might have to go up.

However, Mark Todd, director at price comparison website energyhelpline.com, said: "With this announcement, the UK's biggest energy supplier is telling consumers very clearly that massive price rises are coming their way."

Jenny Saunders, chief executive of fuel poverty charity National Energy Action, said a 30 per cent price increase could force 1.2 million UK households into fuel poverty and "completely reverse progress made in this area over the past 10 years".

She added: "Low-income families with children, the elderly and vulnerable households will be hit hardest, but a growing amount of households will be feeling the pinch."

British Gas, which has some 17million domestic customers, effectively sets the benchmark on prices for the entire UK industry.

The Daily Mail Cost of Living Index has reported at 19.1 per cent increase in the price of a shopping basket of food and drink essentials.

Government estimates indicate that for every one per cent increase in fuel bills, another 40,000 households is plunged into fuel poverty - spending more than 10 per cent of disposable income on heat and light.

A 46 per cent increase in a year would suggest an extra 1.84million homes would be classed as fuel poor. This group face a nightmare choice between heating and eating.

North Sea gas supplies are declining rapidly and the Britain is becoming more reliant on expensive imports from the Continent via pipeline.

Gas prices in Europe are - for historic reasons - tied to changes in the price of crude oil, which has soared above 126 dollars a barrel in recent days.

There are concerns that prices are also being forced up because European power giants are actively rationing or blocking supplies to the UK.

Centrica said that, on average, month-ahead prices for gas and power were up 92 per cent and 100 per cent respectively from the same period last year.

Shares in Centrica, which have underperformed the FTSE 100 index by almost 22 percent in the past 12 months, were down 1.6 percent at 283 pence in early trading.

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