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June 3, 2011 6:07 pm

Utilities try to reverse public criticism

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Ongoing disputes between energy companies and the industry regulator are destroying confidence in gas and electricity pricing, according to consumer groups.

Ofgem, the regulator, has accused energy companies of adjusting their prices in response to rising costs more quickly than they reduce bills when costs fall.

In particular, it pointed out that, over the winter, nearly all of the largest companies were quick to hike up tariffs when wholesale prices rose, but slow to revise them when they fell.

“Given that EDF Energy had announced a price freeze, we also looked at what would happen if the rest of the big suppliers had held back putting up their prices in the same way EDF Energy energy did,” said Ofgem.

It found that if all companies had followed EDF Energy’s lead, UK customers could have saved around £10.

However, Energy UK, the trade body, disagreed with the findings, blaming statistical anomalies on the difference between rising and falling bills.

The fractious relationship between the six largest energy companies – EDF, British Gas, E.ON, RWE Npower, Scottish and Southern Energy (SSE) and Scottish Power – and the body charged with regulating them has been driven by consumer mistrust towards energy companies at a time when energy bills are expected to rise rapidly.

Consumer Focus has warned that disagreements over whether energy companies pass on wholesale energy cost increases quickly while being slower to pass on price falls are making the industry less popular.

In spite of this mistrust, customer switching between providers remains low, which has led to accusations that the market is uncompetitive and confusing for customers.

This week, the government introduced a “green deal” which will come into effect next year and will, it hopes, help instill more faith in utility companies. The policy will enable households to make their homes more energy efficient by using loans from high street companies to finance the alterations. Loans can be repaid with the savings from energy bills and the government hopes to overhaul every home in the UK eventually.

An environmental thinktank predicted that if a household carried out the maximum energy-efficient changes, it could halve its energy bills. Uswitch has pointed out that household savings will be even greater if energy bills continue to rise.

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