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Ofgem to investigate energy price hikes

Ofgem to investigate energy price hikes

Category: Gas and electricity

Updated: 26/11/2010
First Published: 26/11/2010

MONEYFACTS ARCHIVE
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Brits feeling chilled by recent energy hikes will be relieved to know that the consumer watchdog Ofgem will be reviewing the rises.

In the last few weeks three major energy suppliers have announced price rises.

Ofgem has revealed that, following these price hikes, suppliers' profit margins will increase from £64 to £90 per typical customer.

The watchdog said that, while it expects firms to make a profit, it wants clarity on behalf of customers that the market is transparent and is working as effectively as possible.

"With Britain facing an investment bill of £200 billion over the next 10 years, consumers have the right to expect that the energy retail market is providing them with value for money," commented Ofgem's chief executive, Alistair Buchanan.

Last week, Scottish Power became the third major UK energy supplier to announce winter price rises for domestic customers - 8.9% for electricity and 2% for gas.

Before this, both British Gas and Scottish and Southern Energy announced price hikes of 7% and 9.4% respectively.

All three energy suppliers have said the prices hikes are due to a 25% rise in the wholesale cost of energy since the spring.

In contrast, EDF Energy has pledged to keep its standard tariffs fixed over the winter.

"Our analysis published today shows an increase in company margins from £65 to £90 at a time of rising energy prices, which causes Ofgem to rightly ask if companies are playing it straight with consumers," said Mr Buchanan.

"The energy retail market can only be fully effective if consumers have confidence that the market is transparent and easy to take part in. So we will go beyond our usual quarterly reports on prices and do a comprehensive review of the retail market and our recent reforms from the consumers' perspective."

"Greater transparency in the market is good for consumers, investors and for the energy industry as a whole."

Ofgem aims to have completed the review by March 2011.

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