GMB calls for energy bills to be capped after 32% rise in electricity and 26% rise in gas prices

GMB, the union for workers in the energy sector, is calling for household energy bills in the UK to be capped as a new study shows that electricity price increases of up to 32.3% and gas prices of up to 26.4% have been implemented in the last few months.

GB Energy has increased electricity prices by 32.3%, Flow by 18%, npower by 15%, SSE by 14.9% and E.ON by 13.8%.

GB Energy has increased gas prices by 26.4%, LoCO2 by 9.9%, First Utility by 8.8%, Bristol Energy by 5.9% and npower by 4.8%.

The table below shows how much electricity and gas prices have increased over the last  four months:

Gary Smith, GMB Scotland Secretary said: “The argument that energy companies are fixing prices doesn’t really stack up.

“The Competition Markets Authority reported in July 2015 and did not suggest there was price fixing.

“The behaviour of some energy companies – especially the smaller ones – with frequent eye-watering increases, suggest companies are in real trouble [see table above].

“When small energy companies go bust it hits consumers and OFGEM then has to find a company to take on those consumers’ accounts.

“The introduction of competition was supposed to deal with the problems in the energy market and drive down prices.

“The strategy clearly isn’t working. Wholesale prices have been volatile and it is leaving small companies vulnerable.

“The volatility was driven in part by damage to the interconnetor to France and by problems in the French nuclear fleet.This further highlights concerns over security of supply and energy self-sufficiency.

“Another question that the government will need to address is where investment is going to come from for new power stations? Margins are already very tight and are set to get worse.

“GMB Scotland is also concerned that energy companies could respond by cutting jobs and offshoring even more work.”

However, Ryan Thomson, Partner at Baringa Partners, said: “While the Government clearly believes that action may be needed to increase competition in the energy market, a price cap is not the right solution to the problem.

There is clearly something wrong when a large group of customers who are not actively changing suppliers are effectively subsidising those who decide to switch and distorting the perceived levels of ‘savings’ available in the market, as is currently the situation.

“We must distinguish between customer groups who are less informed and less able to access the best deals on the market, for example those without internet access or bank accounts, and those who are well informed but chose not to engage in the market.

“A one size fits all solution like a fixed price cap is unlikely to address this and could have unintended negative consequences.

“Government is encouraging customers to switch energy supplier. But any sort of change to the market price of energy might actually increase the number of customers who remain with the larger suppliers, as it would reduce the difference in price between suppliers and therefore remove the incentive for customers to switch. Both large and small energy providers would be stuck in a rut, with dented profits, at a time when significant investment is required.

“Instead, we need a structure that encourages suppliers to innovate. The Government and Ofgem should be looking at other measures of customer engagement to really judge if the energy market is competitive and working for all.”