July 8, 2011 / 2:15 PM / 8 years ago

UPDATE 3-Centrica raises UK energy bills

* Centrica lifts gas prices by 18 pct, power price by 16 pct

* Increase comes one month after Scottish Power increased prices

* SSE to stop doorstep selling amid investigation (Adds details on wholesale price rises)

LONDON, July 8 (Reuters) - Centrica on Friday became the second of Britain’s six largest energy suppliers to increase energy tariffs this summer due to rising wholesale power and gas prices, it said.

Centrica, which owns Britain’s largest energy supplier British Gas, said it will raise domestic tariffs for gas by an average of 18 percent, and for electricity by an average of 16 percent, on August 18, 2011, an increase which will affect nine million British energy users.

Centrica’s announcement comes barely one month after Scottish Power unveiled plans to increase British domestic gas tariffs by nearly a fifth at the start of August.

Analysts warn that other suppliers are likely to follow suit, a move which is expected to push consumer price inflation to 5 percent in the autumn, said Howard Archer, chief UK and Europe economist at IHS Global Insight.

“Today`s announcement follows steep rises in wholesale costs, which have increased 30 percent since last winter because of higher global demand for gas,” Centrica said.

“The company cannot continue to make a loss on the energy it sells, as it needs to be a profitable business in order to invest in future sources of energy for Britain.”

British wholesale gas prices were on Friday around one quarter higher than levels in January, pushed up over the past six months due to civil unrest in gas producing countries such as Libya and Yemen.

The loss of nuclear capacity in Japan due to the March tsunami led it to increase its imports of liquefied natural gas (LNG). This has tightened the global LNG market, key to Britain’s gas supply, and also added to price pressures.

In Germany, around 7 gigawatts of nuclear power capacity were shut down following Japan’s nuclear crisis, which has pushed up power prices across Europe as the continent’s largest economy will rely more on imports from neighbouring markets to cover the short-term power supply losses.

“The impact of wholesale energy prices is the primary driver of end-consumer prices as these represent around 50 percent of a consumer’s bill,” said Ronan O’Regan, director for energy and utilities at consultancy PwC.

Shares in Centrica, which have risen 2.5 percent in the last three months, were largely unchanged on the day at 327.7 pence by 1316 GMT, valuing it at around 17 billion pounds ($27.3 billion).

Britain’s Energy Secretary Chris Huhne said the government’s power market reform, which is to be presented in a White Paper next week, will help maintain energy security at an affordable price.

“The UK electricity market has to change, so that we escape the cycle of fossil fuel addiction. Alternatives like renewables and nuclear power must be allowed to become the dominant component of our energy mix,” he said in a statement on Friday.


Scottish & Southern Energy , also one of Britain’s biggest six utilities, said on Friday it would suspend all of its doorstep sales activity in Britain with immediate effect, in a move that could result in the loss of up to 900 UK jobs.

“Changes in products, services and processes mean the energy market has matured to a stage where we believe that commission-based doorstep sales is no longer a sustainable way of securing energy customers for the long term,” Alistair Phillips-Davies, SSE’s generation and supply director said on Friday.

The company added that up to 900 jobs in the UK could be lost subject to consultation with potentially affected employees.

Utilities including SSE, Iberdrola’s Scottish Power, RWE’s npower RWEg.DE and EDF energy are being investigated for lack of clarity in approaching new customers on the doorstep.

“Our investigation into SSE will proceed regardless of whether the company has announced that it will no longer carry out doorstep selling,” a spokesman for Ofgem said on Friday.

Six out of 10 energy customers interviewed by consumer advice company Which? said they felt pressured by companies to switch supplier.

“We felt SSE made a really, really aggressive sales pitch and when they announced about a month later they would increase prices we were laughing at their blatent robbery,” said Joseph Plamus, a London resident who switched to SSE as an energy supplier through a doorstep sale last December.

The UK’s top six utilities defended their power pricing at a parliamentary committee hearing in May, saying they acted no faster to raise prices than lower them.

Shares in SSE were 0.9 percent down at 1410 pence by 0906 GMT, valuing the company at around 13.3 billion pounds ($21.3 billion).

$1 = 0.622 British Pounds Reporting by Karolin Schaps, Adveith Nair and Rhys Jones; Additional reporting by David Milliken

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