Energy News

Energy ‘big six’ may face windfall tax after MPs call for urgent action

Tuesday 29 July, 2008

By becca.talbot@consumerchoices.co.uk

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After a committee of MPs called for an “urgent” reform of the UK energy market to cut fuel poverty, the Government is said to be considering a windfall tax on energy companies.

A committee of energy conscious MPs have spoken up about their fears of fuel poverty hitting the vulnerable, in a report published yesterday, prompting the government to take action against the energy companies who are planning to raise fuel prices further.

The report from the Business and Enterprise Select Committee has called for a “fundamental rethink” of the energy market and the government’s fuel poverty policy, because millions of households will inevitably be left struggling with rising gas and electricity bills.

The proposal of a windfall tax, which is backed by trade unions, could be approved by Gordon Brown as he draws up a plan to help families struggling with rocketing prices and housing market problems. It could also help combat Britain’s leading energy suppliers making sizable profits from soaring oil and gas prices.

Mr Brown, commenting on EDF’s shock price hikes last week, which saw gas prices increase by 22% and electricity prices increase by 17%, said the rises were “unacceptable”.

The news of a proposed windfall tax comes as British Gas publicised that its 16 million customers could be hit with increases of 20% or more by the end of this week, after parent company, Centrica, has announced its latest financial results. EDF Energy, the French group that supplies more than five million households in the UK, was the first to raise its prices last week, resulting in the equivalent of a £204 increase to the average household’s annual bill of £1,211.

“Millions of households will inevitably be left struggling with rising gas and electricity bills.”

Energy provider Scottish and Southern have also warned its nine million customers to expect a sharp rise in their gas and electricity bills before the cold months, as the group said its pre-tax profits are “on course” to grow from the £1.23bn recorded in the last financial year.

The committee said it had found no evidence of collusion between the “big six” companies – British Gas, E.ON, Scottish Power, Scottish and Southern, EDF, and npower. Chairman Peter Luff said: “It is clear that there are very real problems in the energy market at all levels.”

“Some of these are strategic issues, such as the functioning of wholesale markets, while others are more specific concerns, for example, how suppliers conduct their doorstep sales to encourage switching,” he added.

Chris Eagle of EnergyChoices.co.uk says: “A great many households face a difficult winter; it is imperative that the Government reviews its approach to fuel poverty, and does so as soon as possible.”

Chris continues: “Capped tariffs are now the only way to avoid the long term effect of these energy price hikes.”