How will energy customers fare in 2013?

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January 3, 2013 by Nash Riggins

2012 has undeniably been a horrendous year for domestic energy customers in the UK; however, if the market continues along its present trend, 2013 may prove to be an even worse year.

Since January 2012, domestic energy prices have increased erratically throughout the country. From 2011-2012, the average bill increased by around 11% – in fact, some suppliers increased their domestic rates by up to 19%. 2012 proved to be equally detrimental to the pocketbooks of most consumers.

With the announcement that it will increase dual fuel prices by an average of 8.7% by 18 January, E.ON Energy recently became the final amongst the UK’s Big 6 domestic energy suppliers to announce a major price hike. By the time that this most recent increase has been implemented, the average dual fuel bill will have risen by 8.81% within the last 5 months alone.

Unfortunately, 2013 is already shaping up to be the worst year yet for energy customers. First and foremost, this can be attributed to the DECC’s push for tariff simplification, as well bills emerging from Westminster that are undeniably killing competition within the domestic market. Both legislative movements undeniably have the wellbeing of the consumer in mind; however, they have foolishly failed to account for the economic ramifications of their short-term actions.

By restricting an already relatively low number of tariffs further still, the DECC and OFGEM are allowing for energy suppliers to substantially hike their prices without consequence, simply because they can. Indeed, the Coalition’s off-the-cuff response to demand that energy customers are inherently placed on their supplier’s cheapest available tariff made zero progress in minimising the long-term impact of the industry’s ever-increasing price hikes, as the Bill has merely served to allow suppliers to raise the rates of their lowest tariffs in unison and go unpunished.

Finally, the funding for Energy Secretary Ed Davey’s vision for the UK’s low-carbon future – which is undeniably vital to the nation’s infrastructure – is systematically flawed. It includes government obligations for domestic suppliers and distribution companies not only to substantially enhance their energy efficiency measures, but also to pay for the UK’s infrastructure upgrades. Unfortunately, Mr Davey has opted to do so by allowing energy companies to increase all domestic energy bills by up to £100 per year.

Accordingly, domestic energy customers could expect to see their gas and electricity bills rise by up to 18% by the end of 2013. This estimation fails to account for the impending VAT increase on domestic fuels in which the EU appears dead-set on pursuing – if allowed to happen, every UK energy customer will fall victim to an unavoidable overnight increase of 15% on their energy bills.

Faced with such a grim reality, what can domestic energy customers do in order to minimise this massive impact upon their daily lives? At present, the average UK energy customer spends 8% of their net disposal income on bills. In the medium term, this figure could realistically rise to around 25% of an individual’s yearly net disposal income.

Like it or not, this cannot readily be avoided. Consumers must face up to the fact that a substantial majority of the fuel used to power their homes is produced via a finite resource under heavy demand. Until progressive legislature is established, energy prices will continue to rise. Accordingly, customers nationwide must demand that their politicians address this issue head-on and transparently – rather than merely attempting to win votes by tossing ineffective, short-term legislature at the problem.

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