Energy Costs to Rise in New Year

07/12/2007

EDF and E.ON are two of a number of energy groups that are reported to be contemplating price rises of up to 10 per cent shortly after New Year’s Eve. One industry source was quoted in The Times as saying: “It is not a question of if, so much as when. Once one goes, they will all go.”

A combination of soaring prices in wholesale gas markets and rising distribution costs related to infrastructure improvements have hit energy suppliers in recent months. European suppliers such as E.ON are especially vulnerable to fluctuations in the continental gas market, which is closely linked to oil prices.

Catalyst Consumer Services, an energy broker, has forecast that retail energy prices could rise by up to 10 per cent in the New Year, a margin that would raise average UK household energy bills to more than £1,000 a year.

A spokesman for E.ON said that it was “closely monitoring wholesale power and gas prices” but had no plans to adjust them. EDF said its prices were “continually under review” and that they would continue to be “competitive”.

The possibility of more price rises after New Year’s Eve signifies a u-turn in the outlook for UK energy prices from earlier this year, when suppliers announced a series of price cuts following a period of steep rises. In March and April, British Gas trimmed gas prices twice, by 17 per cent and 3 per cent.