Npower cuts 5%

The energy supplier, Npower, is to cut its standard gas price by an average of 5.2 per cent.

The typical annual bill for 1.2 million customers will drop by £32.

It is the fourth major provider to reduce prices in the wake of the falling cost of oil, following moves by Eon, SSE and Scottish Power.

While Eon's price cut was effective from 1st February, Npower's customers will have to wait until 28th March for the saving.

Will fixed rate energy customers get reduced bills?

Update here.

There's a big debate over who should foot the bill for insulation and energy-saving measures under ECO (the Energy Company Obligation).

Up until now the suppliers have had to pay, passing the cost to customers -- adding around £90 to the energy bill.

But after the recent outcry over energy prices, those same suppliers now expect the Chancellor to shift the cost to taxpayers, with the news expected in 5th December's Autumn Statement (shouldn't it be the Winter Statement?).

EDF put up its prices by less than the others, saying it was assuming the Chancellor would lighten the burden. Other companies have said they'll scale back the price hikes they have already announced.

But millions of customers are on fixed price deals. The prices they pay are not supposed to change, raising the risk that they might not benefit from the heralded cut in bills.

Well, I hear from npower today that they will pass on any price reductions to fixed rate customers, even though -- according to the small print -- they don't have to.

Will the other suppliers do the same? They won't want to look like Christmas Scrooges, will they?

Energy bills have more than doubled

A typical dual fuel gas and electricity bill was £610 a year in 2004.

That figure has now risen to £1,320 -- and more than £1,400 for many after the latest round of price increases, including Scottish Power today.

Of that the so-called green levies account for about £112.

So bills have doubled in less than a decade, even if you lop off the green levies.

The £112 is set to rise to £194 in 2020.

It includes £47 from the ECO -- the obligation on suppliers to insulate some people's homes and renew their boilers -- and £11 from the Warm Home Discount, a scheme to reduce bills for low income customers.

See this from DECC on page 78 for the breakdown of the green charges which David Cameron says he is going to roll back.

Petrol down, gas up

It's a puzzle for anyone used to seeing prices for the various types of energy we use moving backwards or forwards hand in hand.

The cost of filling up the car accelerated ahead but now it's gone into reverse. Well, slightly, by 5 and a half pence a litre.

But the gas price bubble just seems to grow bigger and bigger. More than 8% bigger with British Gas's latest price increase.

One explanation is that petrol prices are affected by movements in the dollar/pound exchange rate, because crude oil and refined petrol are both priced in dollars.

The pound has enjoyed a significant recovery against the dollar in recent months, jumping from about $1.50 in value to around $1.60.

So while crude oil hasn't moved much in world markets, the cost to us in the UK has gone down.

Gas, on the other hand, is traded in sterling in the UK. There is less of the currency effect.

Not everyone in the energy market believes there has been enough of a rise to justify the price increase.

But British Gas says the cost of getting hold of gas and electricity accounts for a third of the jump in bills.

Will the petrol drop compensate for the gas hike?

If you fill up the car once a week, you are likely to gain more than you lose.

However, occasional drivers will still have cause to shiver from this week's energy news.

The petrol benefit will be outweighed by the cost of keeping warm.

Some of your responses on twitter:

@immaggi

Shhh, don't say it out loud or they'll hike the petrol up too!

@seeperry

Lack of gas storage is a partial explanation.

@GoodfishLtd

Because #Milliband warned the #energy companies that #Labour would cap their charges, so they're all rushing to the counter now!

‏@graemeburton

real-reason-why-energy-prices-are-spiralling-out-control Basically, the reason is policies intro by @Ed_Miliband that the coalition won't reverse.

@Shinsei1967

Petrol Fuel Duty frozen and petrol co's don't need tens of billions of new investment in plant and distribution.

@obotheclown2m

different raw materials. Duh.

Doorstep wolves should never have been unleashed

Here's a shocking case of door-to-door sales reps tricking and pressurising unsuspecting customers into switching gas and electricity suppliers.

They use false claims about prices, bribes and straightforward blarney to hoodwink people.

Some victims are switched without their knowledge, using information about relations who have died or details obtained from the electoral register to fill out supplier transfer forms.

Quite rightly the company is fined millions of pounds.

Ofgem, the energy regulator, says: “Mis-selling causes great confusion and distress for individuals, often those who are most vulnerable."

"It also damages customers’ confidence in switching suppliers which means that they may not be benefiting from consumer choice as they should."

Familiar? No this isn't SSE (Scottish & Southern Energy) in 2013. It is London Electricity, including Virgin Energy, in 2002.

How quickly we forget. It's as if energy companies only just started ripping off customers.

No one has any sympathy for SSE, punished by Ofgem yesterday for its nasty selling tactics.

But why was this still happening between 2009 and 2012, as Ofgem describes in horrendous detail?

Sadly, there is more to this long-running tale of mis-selling, exploitation and profiteering than the predatory methods of several companies.

You see, the scene was set by government reforms and regulators. They actually wanted those doorstep sellers to be on the streets, knocking on doors and ringing bells.

Gas was privatised in 1986, electricity in 1990. Then gas was opened up to competition in 1996 and electricity two years later.

The dogs of competition were unleashed. The authorities thought they would be sheepdogs, herding customers towards better prices.

In fact, they were wolves.

And because the received wisdom was that most customers would pay less if they switched supplier, not much was done.

They may have been wolves but they were doing God's work, so to speak.

It was a very damaging situation:

*It was wrong for people to be hoodwinked

*It was wrong for the industry to be allowed to get away with it for years

*People lost out. Once they'd saved money by switching the first time there was a real danger that the next time they would end up paying more.

Now, the main suppliers have pledged to stop selling on the doorstep when they haven't been asked to make a visit.

The fact is, they should never have been allowed to do it in the first place.

Gas - 54% imported

Where did your gas come from this week?

32% UK production
14% UK gas from storage
Total 46%

31% by pipeline from Norway
21% by pipeline from Holland and Belgium
2% imported Liquified Natural Gas
Total imports 54%

Cold weather = high gas profits

Felt cold in the spring and early autumn? That's one reason why SSE (formerly Scottish & Southern) turned in a higher profit.

This is what they say in their half year results:

"Earning a sustainable profit in Retail

• Return to profit in Energy Supply mainly due to significantly higher household gas consumption arising from colder weather

· Average GB household gas consumption up 27.9%; electricity consumption up 2.8%

Operating Profit in Retail, 6 months to 30 September
2012                                                                      2011
Energy supply £48.7m                                           (£133.7m)
Energy-related services £27.0m                              £32.3m
Retail segment operating profit  £75.7m                 (£101.4m)

The increase in consumption was in response to below average temperatures during the six months to 30 September 2012 compared with the same period in 2011, when the temperatures were above average.  According to the Met Office April in 2012 was the coldest since 1989 and September in 2012 was provisionally the coldest since 1994."

SSE's latest price increase kicked in during October, so didn't affect these profit figures.

Energy price "concern"

A senior official from the energy regulator, Ofgem, has voiced concerns about government plans to make sure gas and electricity customers benefit from the lowest prices.

Andrew Wright, Ofgem's senior partner for markets, told MPs that "Not all consumers will be in positions where they will necessarily want to be moved onto the cheapest deal with their supplier."

The Prime Minister said on 17th October that he would legislate so that energy companies "have to give customers their lowest tariffs".

Suppliers were shocked by the remark, which implied that they could be forced to switch customers to their standard tariffs.

But later David Cameron clarified the policy saying that the coming Energy Bill would "ensure that customers get the lowest tariffs".

Today Mr Wright explained Ofgem's worries, saying: "It would be a concern if someone who was paying a modest premium for a green tariff, for example, was automatically switched onto the standard tariff."

He added: "Similarly the choice between fixed term and variable is one where a consumer may choose to pay a higher price in the short term in order to get the stability in the longer term."

He said he understood that the government was fully aware of the concerns and he expected any policy proposals which emerge would recognise that.

Andrew Wright to the Energy & Climate Change Committee:

"It would be a concern if someone who was paying a modest premium for a green tariff for example was automatically switched onto the standard tariff and similarly the choice between fixed term and variable is one where a consumer may choose to pay a higher price in the short term in order to get the stability in the longer term.

"Not all consumers will be in positions where they will necessarily want to be moved onto the cheapest deal with their supplier. My understanding is that the government is fully aware of that and I would expect any policy proposals which emerge would recognise that.

"One way in which that could be guarded against is providing customers with the opportunity of opting out of any automatic switch, that does give a safety valve."

Why our energy bills are stupid

British Gas's 6% price rise has highlighted an absurdity about the way in which we are charged, and pay for, gas and electricity.

The point is that prices will continue to go up over time, almost inevitably. Hence, we need to reduce consumption, both to hold down our bills and to reduce carbon emissions.

Yet the pricing structure we are faced with actually encourages consumers and businesses to use more.

Most tariffs have a daily standing charge or they start high and then go down once you have burned up a certain amount.

Low users tend to pay the most per unit.

Why not turn the system on its head: start low, then impose higher tariffs if you use more, rising to penal rates?

That wouldn't be in the suppliers' interests, because they're in the weird business of trying to sell more energy, while having to fly the flag for energy conservation.

But it would cut usage of gas and electricity - and protect people and businesses who did their best to remain within reasonable consumption limits.

There's a hint today from British Gas on can be achieved.

It says that despite hefty price increases in recent years, customers bills have only gone up in line with inflation, because they are using less.

One reason is that people simply can't afford to turn on the heating.

Wouldn't it be better if they paid less for what they really needed, but a higher charge for wasting energy?

Nothing to show for our oil?

The purchase by Norway's £400bn oil fund of a half share in Sheffield's Meadowhall shopping centre raises yet again the question of whether the UK has squandered the riches of the North Sea.

Why is Norwegian oil money being deployed to buy prize assets here while we have no oil money to spend in Norway?

In simple terms, during the oil boom our governments spent their North Sea winnings on cutting national borrowing and keeping down taxes. Whatever came in went straight into the day-to-day budget..

In contrast , for the last 16 years Norway has squirreled away its North Sea money in a national oil fund. Today it uses the income from the fund -- just the income, mind -- to cover 11% of its national spending.

And, ironically, now that we are buying Norwegian gas in large quantities, we too are contributing to Norway's colossal nest egg, one of the biggest sovereign wealth funds in the world.

The £348m purchase of 50% of Meadowhall is the result of a new policy of buying into property round the world. It comes after a £452m investment in London's Regent Street last year.

Norway is the biggest investor in shares across Europe, so its holdings took a knock during the financial crisis. Now, like Middle Eastern sovereign wealth funds, it is picking up trophy properties.

"The purchase gives us exposure to one of the largest and most dominant shopping centres in the UK," said Karsten Kallevig, chief investment officer for real estate.

So the taxpayers of Norway will be saying a big "Thank You" to the shoppers of Sheffield. By spending in Meadowhall, they will help local stores pay their rent and Norwegians will pocket a share of the rental income.

The oil fund's official name is the Government Pension Fund, but the word "Pension" in the name is a bit misleading. The benefit for Norwegians isn't restricted to pensions.

What happens is that 4% of the fund, or £16bn currently, is diverted each year to subsidise government spending. Effectively, it keeps hospital beds open and helps pay for benefits.

The fund keeps growing, though, because levies on oil and gas production and on oil companies bring in an extra £30bn annually. As the oil carries on gushing and oil prices stay high, the Norwegian nest egg can't stop getting bigger.

In the UK the Callaghan government of the 1970s flirted with the idea of setting up an oil fund but, in a time of mounting economic crisis, it was too tempting just to grab the money. And it has been ever since.

Norway started on the same route but had second thoughts after the oil price collapsed in the 1980s. The idea of its fund was to try to smooth out the bumps from fluctuating prices and preserve the gains from the oil bonanza for future generations.

Professor Alex Kemp, an oil expert from Aberdeen University, says the British public has missed out because a fund wasn't set up here in the 1980s.

"We could have introduced a fund and that would have been the right time because these revenues were extremely high," explains Professor Kemp.

"We didn't do it because the Treasury wanted the funds to reduce the public deficit. We broadly speaking consumed the benefits rather than invested them."

To be fair, the Norwegians had more money to play with: their oil production is higher and the proceeds are enormous in comparison to the country's population of just 5 million.

Could we have done it? Well, the Shetland Islands did.

When oil started arriving at Sullom Voe and ships docked nearby, there was a flood of cash. The council set up an oil fund which still stands at £185m today, even after upgrading roads, ferry terminals and local swimming pools.

In Scotland, the SNP's Alex Salmond has long advocated setting up a special fund supported by North Sea oil revenues. However, it is unclear when that could happen, given the pressure on the Scottish government's budget.

Now that North Sea oil is well past its peak, there's little prospect of ever amassing a fund in the UK like Norway's.

UPDATE: Just for the record, Orkney has an oil fund too. It's worth £171m. Annual withdrawals are supposed to be no more than £4.7m, but the council can take out more if it wants - and has done in the past.

Trouble keeping warm

Last autumn's sharp gas and electricity price rises pushed an extra 400,000 English households into fuel poverty, according to the Energy Department, DECC.


It says that "price rises in the latter part of 2011 lead to an increase of around 0.4m households", taking the total to 3.9m.


Since then we've seen a modest cut in prices earlier this year, but British Gas has indicated that prices will rise significantly again before the coming winter.


So the fuel poverty total is likely to rise once more.


Fuel poverty is defined as households which spend more than 10 per cent of their income keeping warm.

Help if the energy bill is a problem

Scottish & Southern is bringing in its prices rises from today. Eon's price hikes came in yesterday and npower's arrive on 1st October. Scottish Power and British Gas tariffs have already gone up.

The CCCS (Consumer Credit Counselling Service) says that a third of people with debt problems are also in fuel poverty - they're struggling to pay their bills.

If you're having trouble paying for gas and electricity, here are some places to go to for help:

Home Heat Helpline 0800 336699

CCCS Debt Remedy

My Money Steps

British Gas, Scottish Gas Trust

Other British Gas help
And check with your supplier for help, if it's another one.

Winter Fuel Payment

Cold Weather Payment

How British Gas nudges you into paying more

Are we too trusting, too gullible or too stupid?

Like many businesses, British Gas doesn't much care which word describes us best. It's just keen to take advantage.

Hence the message the company is sending out to customers who were on its Websaver tariff, which is guaranteed to be 6% lower than its Standard tariff:

"We would just like to remind you that your WebSaver 5 energy tariff is coming to an end on 28 February 2011. As a result, you will be automatically transferred on to our standard gas and electricity tariff so you don’t need to do anything."

Granted, they include a link which explains how much the average Standard bill will be, though not comparing it to yours. And, later in the note, there is a link which guides you to a comparison of all their tariffs.

But why not provide the comparison up front and show that your charges will rise to fill that 6% gap?

The point is that customers really do need to do something, and fast. The obvious move would be to renew the Websaver tariff or they could shop around.

Plenty of them will put in some research to discover the best deal but, inevitably, a number of customers will not. They will end up paying more for their gas and electricity for months or even years.

And British Gas's profit margin will get a little bit fatter.