UPDATE 1-E.ON limits UK energy price rise after policy change

Fri Dec 6, 2013 7:54am EST

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LONDON Dec 6 (Reuters) - E.ON is to raise energy prices for British households by 3.7 percent, announcing the lowest price hike of the "big six" utilities after factoring in the government's removal of some environmental and social levies from bills.

Soaring energy costs have become a big political issue in Britain after other firms hiked prices by an average 8 percent in the autumn - more than three times the rate of inflation.

The government on Monday detailed a plan to help cut energy bills as part of its effort to seize the initiative from the opposition Labour party which has promised a temporary energy price freeze if it wins the next election.

The government plan will result in average bills falling by around 50 pounds, it said, meaning the average increase for big six customers could fall to between 4 and 5 percent.

"The likelihood of further price rises over the next 18 months caused by an increase in the cost of social and environmental obligations has receded due to the recent action taken by the government," E.ON UK's chief executive Tony Cocker said in a statement on Friday.

With an election in Spring 2015, limited energy bill inflation will please the government as the cost of everything from heating to rail tickets takes centre stage in domestic politics amid Labour's efforts to shift voters' attention from the return of economic growth onto a fall in their real incomes.

E.ON, the last of the big six to raise prices this winter, said its increase would take effect from Jan. 18.

Britain's big six energy companies - E.ON plus British Gas owner Centrica, SSE, RWE's npower, Iberdrola's Scottish Power, EDF Energy - supply 98 percent of the country's homes.

EDF in November said it would raise gas and electricity prices by 3.9 percent, pre-empting the government's move to roll-back some social and environmental charges.

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