Competitively-priced energy benefits all household and business consumers. To experience these benefits, consumers need energy markets to work effectively.
Why did companies put their prices up last year?
It is important that energy suppliers explain price rises clearly to their customers. The six large UK domestic suppliers all announced price increases in 2011, citing rising wholesale gas and electricity prices as a main reason for this. Wholesale gas and electricity prices account for around half of the average energy bill, and did indeed rise over the year, mainly driven by international factors including nervousness in global markets and increased demand for gas and coal around the world.
What can I do to keep my bills down?
Householders can control their bills by shopping around for the best energy deal in the market and switching, and by taking energy efficiency measures – such as loft and cavity wall insulation – so they spend less on heating their homes. The Government requires the big energy suppliers to help households with energy efficiency measures and to provide them free to some of the most vulnerable customers. Nearly half of Britain’s homes do not have adequate basic insulation and are throwing away at least £100 in wasted energy payments every year.
The Energy Saving Trust offers advice on the latest available local offers on insulation. Phone 0800 512 012 for details.
You can also visit the Check, Switch, Insulate to Save web page on Directgov for information on all the switching sites and energy efficiency resources available.
But if all the Big Six put their prices up, what point is there in switching?
Switching is not just about switching between suppliers – sometimes savings can be made just by changing tariff or to a different deal with the same supplier.
Why doesn’t the Government refer the Big Six to the Competition Commission?
Referral to the Competition Commission is a matter for the independent regulator to decide in the first instance. Ofgem has tough powers to regulate the energy market and is currently progressing its reforms to the retail market.
DECC does work closely with Ofgem, competition authorities and energy companies to help ensure energy markets operate effectively. For example, we measure UK electricity and gas prices for different types of consumers against European averages. See Quarterly energy prices for further details.
What is the Government doing right now to help keep energy bills down?
What is the Government doing to help keep energy prices down in the longer term?
Government policies are focused on keeping the lights on in the cheapest, cleanest way, to make sure households get the best deal in the long term.
Over the next ten years, we will need £110 billion of investment in electricity plants and networks and another £90 billion of investment in other infrastructure to replace ageing plants and avoid the risk of blackouts; around a quarter of the UK’s existing generation capacity will need replacing by 2020 as many nuclear and coal plants reach the end of their lives.
If we don’t invest now to reduce both our energy use and our dependence on fossil fuels in the long term, if we have to rely on ever-more expensive imports and leave ourselves at the mercy of international oil and gas prices, the impact on bills will be worse – the future for our energy security far bleaker. That is why the Government is reforming the electricity market to deliver the best deal for Britain and for consumers by:
- creating a greener, cleaner and ultimately cheaper mix of electricity sources right here in the UK, to help get us off the hook of relying on imported oil and gas; and
- nurturing a new generation of power sources including renewables, new nuclear, and carbon capture and storage, which will bring new jobs and create new expertise in the UK workforce.
What about energy mergers?
The Office of Fair Trading (OFT) oversees any energy company mergers or takeovers. The Enterprise Act 2002 sets out the legislation governing this.
Ministers are no longer involved in merger decisions, bringing the UK in line with other countries. This means mergers are now more predictable, as businesses no longer need to factor in the possibility of decisions being influenced by political considerations. Instead, energy mergers are subject to a competition test.
The gas and electricity markets regulator
Ofgem will advise if any merger in the gas or electricity sectors raises competition concerns. The European Commission takes jurisdiction if the merger has a 'community dimension' – in other words, if the effects of a merger could extend beyond our borders to other Member States, and so could affect competition elsewhere in the EU. Ultimately, competition authorities will take action if a merger leads to less choice for consumers.