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   Web Issue 3322 December 4 2008   
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The Herald

Outrage at ‘follow my leader’ 30% gas price rises
ALISON CAMPSIEAugust 22 2008

Energy companies were last night accused of "follow my leader tactics" after two more of the big six firms enforced crippling gas and electricity prices.

Consumer groups fiercely condemned the rises by Scottish and Southern Electric and E.ON, which come as the wholesale price of gas passed the £1 a therm mark - almost double the cost of last year - after a leak in a North Sea pipeline triggered a 14% surge in costs.

The energy giants were accused of using the latest hike in wholesale prices as a trigger to announce their own substantial increases, with the warning that further increases could be on the way.

SSE, which has 8.8 million UK customers, said it was raising gas prices by 29.2% and average electricity costs by 19.2% from Monday.

Rival E.ON unveiled rises of 26% and 16% in gas and electricity prices respectively. Both firms blamed soaring wholesale energy prices.

It marked the second round of rises from both companies this year, with British Gas and EDF energy also imposing a double round of hikes on its customers.

Consumer watchdog Energywatch warned if the hike by Scottish and Southern was followed by a similar rise from ScottishPower, the total number of Scots households in fuel poverty could reach one million by the end of the year. Customers north of the border have already been hit by an earlier rise from British Gas, which trades in Scotland as Scottish Gas and is the third biggest supplier to the country.

There are currently around 700,000 households north of the border living in fuel poverty. This is defined as spending more than 10% of income on keeping warm.

Mike Weir, SNP spokesman on energy and member of parliament's Business Enterprise Regulatory and Reform Committee on the energy markets, criticised suppliers for offering poor levels of competition for consumers. He said: "I must emphasise that there is absolutely no evidence of collusion on energy prices but it is a case of follow my leader. I would expect that in a truly competitive market the companies would try to compete away the difference off each other, but that would not appear to be the case."

Figures, published by Ofgem this month, show that the number of UK electricity and gas disconnections for debt in 2007 soared to 8324 - up by 3270 on the previous year's total. Scottish figures will be released next week.

ScottishPower has not yet announced a second rise this year but "continued to review volatile wholesale costs" adding that a new fixed rate tariff had been introduced to protect customers able to secure a deal against further rises, a spokesman said yesterday. Its rival npower said that the situation was being monitored.

Scottish and Southern said yesterday that the "world energy shock" would have "profound and lasting consequences" on the cost of heat and light.

Alistair Phillips-Davies, SSE's energy supply director, said: "Global demand for all types of energy has risen steeply and supplies of finite resources like oil and gas are under intense pressure. That's one of the reasons why we need to reduce our dependency on fossil fuels, and over the next five years, SSE is investing £3bn in renewable energy to help achieve this.

"The country now relies on energy imports and the prices we all pay for electricity and gas are ultimately determined by the law of supply and demand in a global economy."

Energywatch demanded urgent action to help customers meet higher prices before the onset of winter.

Norman Kerr, director of Energy Action Scotland, said: "When the point is reached, as it has now, that around a third of customers cannot afford the basic products of gas and electricity, then something is very wrong with the market and changes must be made."


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