Energy bills keep inflation high

The latest inflation figures remain significantly above target at 2.7% in December and hikes in gas and electricity bills prevented it from falling back. The Office for National Statistics said the rise in electricity and gas bills exerted the biggest upward influence on the annual inflation rate last month, as several companies raised their prices. It calculated annual electricity and gas price inflation at 3.9% and 5.2% respectively.

Annual inflation on the all-items retail prices index increased from 3% in November to 3.1% in December, with the ONS citing utility bill increases as the largest contributor to this rise. Economists also predict that inflation could increase in the short term, mainly citing further rises in utility bills.

In this context it is interesting that ScottishPower’s CEO Keith Anderson has commented on the UK Government’s plan for energy companies to put consumers on the cheapest tariff. He told the Energy Bill Committee:

“It is not as simple and straightforward as ‘we can just put people on the cheapest tariff’, I am not too sure how we get worded into legislation ‘the cheapest tariff for that individual’.”

He also warned that some people are unable to access online tariffs and it would be difficult to offer this tariff to pre-payment customers. Others prefer higher standing charges to receive lower usage fees and it would be hard to determine what their cheapest tariff would be.

“At its highest level it sounds perfectly sensible and laudable to say ‘let’s put everybody on the cheapest tariff’. But you start to look at the detail of that and it becomes very complicated,” He also said to legislate for such a policy would be “incredibly difficult and incredibly complicated” and called for the inclusion of a sunset clause so the legislation can be reviewed.

These comments reflect the points made by Utilities Scotland (Oct 18) when the PM made his initial muddled announcement.

Meanwhile, Citizens Advice Scotland (CAS) has warned thousands of Scots face a dire daily choice between heating or eating because of rocketing fuel bills. A new CAS report reveals a surge in demand for help with fuel costs, mainly from young, single women, because energy costs have doubled to £1,250-a-year since 2004. More than 7,000 Scots sought help with their bills from the bureau last year and almost half already owed money to energy companies.

CAS policy officer Sarah Beattie-Smith said:

“We know that difficulty paying for energy can make other problems worse, pushing people into debt, worsening existing health conditions and adding to the stresses and strains of everyday life at a particularly difficult economic time.”

With bills expected to reach £1,500 a year by 2016, CAS is calling energy companies to discuss new measures and interestingly, given ScottishPower’s view above, fixing pre-payment meters on the lowest tariff.

With the purchasing power of wages falling, it is inevitable that there will be greater focus on energy prices as the biggest element in inflation rises.

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