UK nuclear decommissioning debacle costs government nearly £100m

Business secretary orders inquiry into flawed tendering process for dismantling old reactors at 12 sites as US firms get paid for out of court settlement

 

The government has been forced to pay nearly £100m in a settlement with two US companies for mishandling the way it awarded a £6.1bn nuclear decommissioning contract.

Ministers have ordered an inquiry headed by the former boss of National Grid to find out why the procurement process was so flawed. Labour said the payout showed “dramatic levels of incompetence”.

The government body tasked with decommissioning old reactors will also terminate the contract it awarded for cleaning up a dozen of the UK’s old nuclear sites nine years early.

In a written statement, Greg Clark, business secretary, said: “This was a defective procurement, with significant financial consequences, and I am determined that the reasons for it should be exposed and understood; that those responsible should properly be held to account; and that it should never happen again.”

The debacle dates back to a 2012-2014 tender process by the Nuclear Decommissioning Authority (NDA) for dismantling 12 sites. They include old reactors at Sizewell in Suffolk, Dungeness in Kent and Hinkley Point in Somerset, where the UK is building the first new nuclear power station in two decades.

A 14-year deal was awarded to international consortium Cavendish Fluor Partnership in 2014, but the bidders who lost out immediately launched a legal challenge.

On Monday, the Department for Business, Energy and Industrial Strategy said it had settled with US-headquartered engineering companies Energy Solutions and Bechtel, for £85m and £12.5m respectively. Had their litigation cases gone to trial, Clark said the “very substantial costs” had the potential to rise much further.

Energy Solutions had claimed a scoring mechanism had changed at a late stage in the tender process and that there was inconsistency in the way bids were evaluated, among other failings.

Former National Grid chief executive Steve Holliday has been appointed to lead an independent inquiry into what went wrong. The inquiry will look at how the mistakes were made and by who, how the litigation was handled, and the relationship between the NDA and the government departments.

Holliday will report to Clark, with an interim report due to published in October.

The government now has the daunting task of starting a new tendering process for the 12 sites, as the deal with Cavendish Fluor Partnership will end early, in September 2019 instead of 2028. Clark said he wanted to stress the deal was “no reflection” on the performance of the consortium, which will continue clean-up work over the next two years.

The contract is being terminated early because the NDA underestimated the scale of the decommissioning required to clean up the Magnox sites, which form part of the UK’s first generation of nuclear power stations.

The share price of Babcock International Group, which has a stake in the Cavendish Fluor Partnership, has fallen by more than 3% since the government announcement.

Rebecca Long-Bailey, shadow energy secretary, said: “By cancelling just two years into a 14-year contact the government has shown dramatic levels of incompetence in the procurement process of this deal.

“British tax payers who stand to lose nearly £100m should be asking themselves not just whether they are willing to put up such ineptitude but also whether the government actually has a well thought out and long term nuclear decommissioning strategy.”

Unions said they were concerned at any potential job losses as a result of the contract ending early.

Mike Clancy, general secretary of Prospect, said: “This is an extraordinary situation given the scale and importance of the Magnox contract to the UK nuclear industry.

“The public, and our members, will want reassurance that the termination process and uncertainty over the future of decommissioning will not lead to standards deteriorating or the loss of UK expertise.”

The Unite union said the financial mess involved in awarding the contract showed the clean-up project should be taken into public ownership.

Stephen Thomas, emeritus professor of energy policy at the University of Greenwich, branded the NDA’s handling of the contract “an immense screw-up.” He added that there would be a further hit to the taxpayer because of the cost of a new tender.

The NDA has an annual budget of £3.1bn, two thirds of which is spent on Sellafield in Cumbria, which stores most of Britain’s nuclear waste.

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SSE the latest ‘big six’ firm to put its prices up

Customers of SSE are set to see their electricity bills rise by 14.9% from 28 April, as the company became the latest of the “big six” energy suppliers to increase prices.

The firm, formerly known as Scottish & Southern Energy, said its typical dual fuel (gas and electricity) customer will see their annual bill rise by 6.9%, or £73 a year. It blamed its first electricity price rise in three-and-a-half years on government policies that require all energy customers to subsidise renewable energy, and the cost of a smart meter installation programme. Gas prices for the company’s 2.8 million customers remain unchanged.

 

Will Morris, SSE’s managing director for retail, said he “deeply regretted” having to put prices up. “We have seen significant increases in electricity costs, which are outside our control,” he said. “Without an increase we would have been supplying electricity to domestic customers at a loss.”

Four of the other big six suppliers have already announced price rises this year, while British Gas has held its prices until August. Scottish Power’s standard electricity prices will increase by an average of 10.8% and gas by 4.7% on 31 March. Npower is raising its standard tariff electricity prices by 15% from 16 March, and gas prices by 4.8%. EDF Energy cut its gas prices by 5.2% in January, but its electricity prices rose by 8.4% on 1 March. E.ON is increasing electricity prices by an average of 13.8% and gas prices by 3.8% on 26 April.

Mark Todd of switching service energyhelpline described the SSE increase as a hammer blow to households. “SSE lost 130,000 customers last year, and are likely to lose even more as customers switch to beat the hikes. The company announced in February that gas usage was up by 10% and electricity usage was up by 2% in 2016, meaning they benefited from higher usage last year and will now benefit from higher prices in 2017. Customers must not continue to stay loyal to the energy giants. Move to a low-cost fixed-rate tariff and you can beat these price rises.”

 

Todd says a typical SSE standard tariff customer will pay £1,141 a year after this price rise, yet could get a deal as cheap as £834 a year by switching.

A two-year investigation by the Competition and Markets Authority concluded last June that 70% of domestic customers of the big six were on expensive standard variable tariffs and could save more than £300 by switching. As a result, customers have been paying £1.4bn a year more than they would in a fully competitive market, the CMA found.

The government is expected to address concerns about the energy market when it publishes a consumer green paper in the spring. John Penrose, a former minister at the Cabinet Office and a Conservative MP, has called on the government to introduce a relative price cap, where the worst-value standard variable tariffs are no more than a certain percentage more expensive than the best-value fixed deals. He said: “We still get lots of competition, lots of choice, but it does mean the most vulnerable of us or those of us with least time to switch suppliers don’t get ripped off.”

Penrose secured a House of Commons debate this week on energy bills. “In most things in life, if you are a loyal customer you are valued and rewarded. But apparently for your energy bill, loyal customers in the view of big energy firms are there to be exploited and not rewarded – and that doesn’t seem fair,” he said.

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British Gas operating profits rise by 2% to £906m

British Gas owner Centrica has fuelled further controversy over energy prices after reporting another profit rise at its British supply business.

It said operating profits at the energy and services arm covering the UK and Ireland rose by 2% to £906 million last year from £891 million a year earlier, helping wider group operating profits at Centrica jump 4% to £1.5 billion.

The company is expected to face fresh calls to address tariffs for businesses and domestic consumers.

The industry has faced mounting pressure to treat loyal customers fairly and has been criticised for being slow to pass on falls in wholesale gas prices, with consumer groups hitting out at the size and timing of cuts.

British Gas announced it was extending a price freeze on its standard energy tariff until August, “despite increases in external costs”, but customers are expecting prices to soar later this year, following the Brexit-induced collapse of the pound and rising wholesale energy prices.

Centrica’s British Gas residential energy supply arm, which only covers UK homes, reported an 11% drop in operating profit to £553 million, compared with £623 million in 2015, but said the reduction was due in part to a customer exodus.

More than 409,000 UK home customers left the business in the year to December 31, marking a 3% fall to 14.25 million.

But the group said it stemmed the outflow in the second half of the year after launching new tariffs and improving customer service.

Group chief executive Iain Conn said: “2016 was a year of robust performance and progress in implementing our customer-focused strategy.

“We delivered our key objectives including improved customer service and more innovative offerings and solutions – while repositioning the portfolio, building capability and driving significant cost efficiencies.”

British Gas is one of few so-called Big Six energy suppliers to have frozen prices in recent months.

Companies including Npower, EDF and ScottishPower have hiked customer prices, with many blaming rising wholesale costs.

ScottishPower recently announced that standard gas and electricity bills would rise 7.8% from March 31, while Npower set out plans to hike gas and electricity prices by 9.8% – a move that will add £109 to annual dual fuel bills.

Centrica said revenues for 2016 dropped 3% to £27.1 billion, versus £28 billion a year earlier.

But the company managed to swing to a pre-tax profit of £2.2 billion, after reporting a £1.1 billion loss due to a writedown last year.

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Partial shutdown at gas platform, storage site outage drive prices higher

British wholesale gas prices rose on Monday as a partial shutdown of the Elgin-Franklin platform in the North Sea and an extended outage at a gas storage facility tightened supplies, traders said.

The day-ahead contract rose by 1.65 pence to 53.00 pence per therm by 1137 GMT, lifted by concerns over gas supplies filtering through into contracts across the near and forward curve.

Gas for immediate delivery was up 0.75 pence to 53.50 pence per therm.

Early on Monday, Total E&P reported that offshore reduction had tripped at its Elgin-Franklin gas platform in the North Sea.

“Offshore production has tripped… On restart production will be limited to five million cubic metres/day for an unknown period,” Total UK Exploration and Production said in a market message.

A company spokesman told Reuters that the Elgin B and West Franklin platforms had been shut down after difficulties drilling a well, but Elgin A and Franklin were unaffected. [GAS/OUT]

Further tightening supply was Centrica’s announcement that an outage reducing withdrawals from Britain’s largest gas storage site Rough would be extended by a month until March 1.

An unplanned outage at SSE’s Hornsea gas storage site will also reduce withdrawal capacity until Feb. 3, the SSE said.

Britain faced a gas shortfall of 26.1 million cubic metres (mcm) on Monday, with demand estimated at 316.1 mcm/day and supplies at 290.7 mcm/day, according to National Grid data.

“Sentiment has fed through into the near curve which has seen prices further supported by the extension to the Rough outage,” said Nick Campbell, risk manager at Inspired Energy.

Average temperatures in Britain are milder than expected on Monday but forecasts for Tuesday and next week indicate colder- than-anticipated weather, according to Thomson Reuters analysts.

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In the Netherlands, the day-ahead gas price at the TTF hub was up 0.65 euro to 20.35 euros per megawatt hour.

In the European carbon market, the benchmark Dec-17 contract was 0.22 euro higher at 5.14 euros a tonne.

(Reporting by 0leg Vukmanovic in Milan; editing by Nina Chestney)

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Energy bills to rise up to 28% for thousands in UK as fixed contracts end

Energy bills to rise up to 28% for thousands in UK as fixed contracts end

With 77 deals expiring before end of April, many customers will find themselves being rolled on to most expensive tariffs

Thousands of UK households are facing gas and electricity bill rises of up to 28% as fixed price contracts signed before recent energy price increases come to an end.

So far this winter, EDF, npower and Scottish Power have all announced hikes, meaning the customers of those companies need to look carefully at what they paying, particularly if they coming off a fixed tariff.

Moneysupermarket has said 77 fixed energy deals are set to expire before the end of April, leaving average households typically facing a £200-a-year increase to around £1,100 a year for gas and electricity.

Gas and electricity price increases of up to 15% – and much more for those coming off old fixed tariffs – have left consumers scrambling to get on a another fixed deal. But even those who switch supplier are likely to end up paying more over the coming year.

EDF, npower, Scottish Power and SSE are among those with tariffs finishing, alongside deals from smaller suppliers such as Spark and Extra Energy. When fixed energy deals end providers roll customers on to their standard variable tariffs, which are typically their most expensive.

Some customers who were on especially cheap tariffs have been told their bills will rise 28%.

One supplier, npower, shocked the industry and even the regulator Ofgem when it announced it was raising electricity prices by 15% while gas bills will rise 4.8% adding a typical £109 a year to average bills.

The other firms to raise electricity prices have announced rises of around 8%.However, British Gas said last week it was freezing bills.

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Moneysupermarket said consumers could switch penalty-free up to 45 days before their existing deal is due to end, under the regulator’s switching rules.

Currently the cheapest providers are names that many consumers will be unfamiliar with, such as Iresa, Economy Energy and Tonik. Of the big six providers, Scottish Power’s online fixed saver is one of the cheaper deals.

Stephen Murray, energy expert at Moneysupermarket, said: “The energy market is really unpredictable at the moment and a huge part of that is rising prices. In June last year the cheapest deals were below £750, whereas currently the average cost of the top 10 cheapest tariffs is £880. It is worth noting that these deals still represent a significant saving on standard variable tariffs.”

He said customers on expiring tariffs should act now to lock in new fixed deals and avoid being rolled on to standard variable tariffs.

“The British Gas price freeze may sound like a fair alternative, but customers are still overpaying by around £170 and so the message is the same – don’t rest on your laurels, standard tariffs still remain among the most expensive. It only takes a few minutes to swap providers to save almost £200 each year.”

Mobile phone users are also facing more expensive bills in the coming months, following the rise in inflation. Vodafone, EE and O2 have said millions of mobile phone customers will face inflationary mid-contract price rises in the next couple of months.

EE is raising some customers’ monthly bills by 2.5% from 30 March, in line with January’s retail price index inflation figure. O2 will increase monthly its charges by 2.6% in April, and Vodafone bills will rise by March’s inflation figure – also from April.

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EDF to raise electricity prices from March

EDF is to raise its standard electricity tariff for UK customers by 8.4 per cent from next March in defiance of government efforts to drive down bills.

The increase — the French utility’s first in three years — highlights renewed energy price inflation over recent months as commodity markets have rebounded. Constraints in electricity generating capacityand depreciation of the pound since the UK’s vote to leave the EU have also contributed.

EDF joined several other utilities in promising to freeze its standard variable power price over the cold winter months but became the first to admit prices would rise thereafter.

The increase — expected by analysts to be followed by other suppliers — sets up a showdown with the UK government next spring, when ministers have promised to publish a green paper including measures to tackle high energy bills.

Government efforts are focused on encouraging customers to switch away from relatively expensive standard variable tariffs of the kind increased by EDF on Friday on to cheaper fixed price deals.

However, analysts and industry executives say that consumers should expect power tariffs of all kinds to rise in coming months in response to rising wholesale costs.

According to data from S&P Global Platts, UK day-ahead wholesale electricity prices rose 16 per cent last month and are up 63 per cent over the past year.

Gas prices have also risen but at a more modest pace and EDF said it would offset its increased electricity tariffs with a 5.2 per cent cut in its standard gas price from January. This would result in a net increase of 1.2 per cent next year for consumers on a standard dual fuel tariff.

“We want to help loyal customers by cutting gas prices ahead of the coldest winter months, and delaying electricity increases until later in the year,” said Beatrice Bigois, managing director of customers at EDF Energy.

“Many industry commentators have said that prices charged by energy suppliers will rise after the winter. We are being open about the fact our electricity prices will go up after our price freeze.”

EDF and the other big six suppliers — British Gas, Eon, Npower, Scottish Power and SSE — have been losing market share to dozens of smaller competitors during the past few years. However, this trend has begun to reverse this year because the large groups are better protected against rising wholesale prices by long-term hedging.

GB Energy, a small UK utility, blamed rising costs for its collapse last month and analysts and industry executives have forecast more failures in months ahead.

To keep the pressure on the big six to keep bills down, Ofgem, the regulator, this week launched a league table “naming and shaming” suppliers with the highest proportion of customers on expensive standard tariffs and Philip Hammond, chancellor, said last month that the government would “look carefully” at whether the market was working fairly in its green paper next year.

Consumer groups said the EDF price rise was a reminder of the importance of shopping around for cheaper deals. Peter Earl, head of energy at Comparethemarket.com, a price comparison website, said households could save an average £327 a year by switching away from a standard tariff. However, with fixed rate prices also rising, he said customers should prepare for a “post-Christmas energy shock”.

Britain facing energy crisis that could see families pay extra to keep the lights on while neighbours ‘sit in the dark’

Britain’s increasing reliance on “intermittent” renewable energy means that the country is facing an unprecedented supply crisis, a senior Ofgem executive has warned.

Andrew Wright, a senior partner at Ofgem and former interim chief executive, warned that households could be forced to pay extra to keep their lights on while their neighbours “sit in the dark” because “not everyone will be able to use as much as electricity as they want”.

He warned that in future richer customers will be able to “pay for a higher level of reliability” while other households are left without electricity.

Electricity pylons rising through mist at dawn, view of The Marshwood Vale from Lambert's Castle, Dorset, England
Electricity pylons rising through mist at dawn, view of The Marshwood Vale from Lambert’s Castle, Dorset, England CREDIT: ALAMY

Mr Wright said that because Britain has lost fuel capacity because of the closure of coal mines, there is now “much less flexibility” for suppliers.

In a stark warning about the future of energy supply in Britain, Mr Wright said that consumers could be forced to pay more if they want to ensure they always have power.

“At the moment everyone has the same network – with some difference between rural and urban – but this is changing and these changes will produce some choices for society,” he told a recent conference.

“We are currently all paying broadly the same price but we could be moving away from that and there will be some new features in the market which may see some choose to pay for a higher level of reliability.

 “One household may be sitting with their lights on, charging their Tesla electric car, while someone else will be sitting in the dark.”

Mr Wright, who Ofgem last night insisted was speaking in a “personal capacity” appeared to lay blame to any future supply issues on the recent focus on renewable energy.

He said: “The system we are all familiar with has some redundancy built into it. It was pretty straightforward and there was a supply margin, but increasing intermittency from renewable energy is producing profound changes to this system.

“We now have much less flexibility with the loss of fossil fuel capacity. Coal has been important, but this is disappearing.”

Wind turbines in Scotland
Wind turbines in Scotland CREDIT: DANNY LAWSON

 He added: “In the future not everyone will be able to use as much as electricity as they want, and there will be a need to re-write the rules.”

An Ofgem spokesman said: ” Ofgem is fully committed to delivering secure supplies for all consumers now and in the future. This is our number one priority. This is why we have driven up network reliability standards and worked closely with Government to ensure secure energy supplies.”

“In order to protect consumers every regulator has to look a possible future challenges. Mr Wright was talking at an University conference in a personal capacity and looking at possible issues that might or might not arise in 10-15 years time.”

Philip Hammond, the Chancellor, has previously said that Britain will need to invest “eye-wateringly large sums of money” just to keep the lights on.

The Chancellor put the cost at around £100 billion in the next 20 years to ensure the country meets its energy needs.

Existing energy customers barred from cheapest deals

Four of the UK’s largest energy companies have been barring their own customers from some of the best deals for gas and electricity, the BBC’s Moneybox programme has learnt.

The cheapest deals are often reserved for new customers only.

Meanwhile existing customers have been offered deals which can be hundreds of pounds a year more expensive.

The four companies, E.ON, EDF, SSE and British Gas said they were simply responding to changes in the market.

While the British Gas tariff has now been withdrawn, other suppliers are still restricting their offers to new customers only.

Such deals were originally banned by the regulator Ofgem in April 2014. Following a recommendation from the Competition and Markets Authority (CMA) in April this year, Ofgem let it be known it would no longer enforce these rules.

‘Gob-smacked’

The discovery of such deals has as come a surprise to some leading industry figures.

Ken Geddes is the chief executive of Scottish-based Energylinx, the fourth biggest energy price comparison business.

When the BBC told Mr Geddes about the new tariffs, he declared himself “stunned” by the difference between the prices some companies offered new and existing customers.

Mr Geddes immediately tested a new-customer-only tariff from E.ON, launched in mid-September.

He first applied as an E.ON customer and then as a customer of another company. The difference in the the two prices he got from E.ON was £260.

“Having spent over a decade doing this job, I don’t think I’ve ever seen that differential”, Mr Geddes told the BBC. “I’m just gob-smacked as to the difference in price”.

four gas rings

 

‘Filtered out’

Large differences in price between new and existing customers are not confined to E.ON.

In the summer, British Gas launched a new-customer-only one year tariff offered exclusively through Uswitch – the UK’s biggest energy price comparison website.

For new customers with average household energy consumption, the British Gas “Home Energy Exclusive Jun 17” tariff cost £735 a year. But for existing customers – barred from that deal – the best British Gas price for the same amount of energy was £989.

That British Gas tariff has now been withdrawn but others are appearing.

The SSE new-customer-only tariff, launched in September, offered new customers on average consumption a year’s energy for £759 . For existing customers, SSE’s best deal cost £972 – a difference of over £200.

Customers were unlikely to have learned such low-priced tariffs were available from their companies even if they searched Uswitch and Energy Helpline.

That’s because such websites start by asking users for the name of their existing energy supplier. New-customer-only deals from that supplier are then filtered out.

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EDF and British Gas bills

‘Very sorry’

As a long-standing customer of EDF, I wanted to find out what tariff I would be offered.

In a web-chat, I was told the tariffs available to me were: “Blue+ Price Protection Sep 2017” – costing £133 more than EDF’s new-customer-only tariff, and “Blue+ Price Freeze Sep 2018” costing almost £300 more.

Were these the “very best tariffs EDF offers?” I asked the agent.

“Yes” was the emphatic reply.

When pressed about the much cheaper new tariff EDF had just launched, the agent replied, “I’m very sorry. This is only for new customers – not existing customers”.

On Friday, EDF relaunched their new-customer-only deal, cutting the price by around £50 a year. So it’s a better deal than before but it’s still not for existing customers.

Strategy

Not all major energy suppliers plan to offer such tariffs.

Scottish Power’s commercial director Colin McNeill told the BBC his company would not offer them.

“These tariffs must stop,” Mr McNeill said. “We must recognise that we are still not a trusted industry, and perceived sharp practices do the industry no favours.”

With Scottish Power, he added: “Any of our customers can switch freely to any of our tariffs at any time.”

The four energy companies which have offered the new-customer only tariffs, E.ON, EDF, SSE and British Gas, all say that they are responding to changes in the energy market and that their new tariffs are part of a strategy to serve a wide range of customers.

All four companies declined the BBC’s invitation to be interviewed about their new exclusive offers.

Ofgem’s chief executive Dermot Nolan told the BBC that Ofgem had acted on the CMA’s recommendation “to make energy competition more similar to telecoms because on the whole that will mean lower prices and better deals for consumers”.

Energy supply cuts may send fuel bills soaring

Householders are being warned to brace themselves for a rise in their electricity bills as a series of freak events conspires to send wholesale prices rocketing.

Safety concerns at France’s nuclear power plants operated by the energy company EDF have led to many reactors being temporarily shut down. There have been similar suspensions in Belgium. In addition, a lack of rain in Norway and Sweden – whose hydro plants generate large amounts of electricity for their European neighbours – has limited both countries’ energy production.

The combined effect has been to send the price at which energy companies buy their power through the roof.

 

Last Monday, a UK energy company buying power on a next-day contract would have paid about £150 a megawatt hour. The average price a year ago was £38.10. For companies that had not agreed forward contracts, the cost has soared to more than £1,000.

Several smaller electricity suppliers have already raised prices or withdrawn competitive tariffs. Energy analysts say it will not be long before the big operators follow if, as looks possible, this winter starts with a protracted cold snap.

An index tracking the price power companies pay for electricity, produced by the consultancy Cornwall Energy, is at its highest since it started in 2012. “It is unusual for there to be significant volumes of outages in the French nuclear fleet, however this is also one of our tightest winters in recent times in terms of extra capacity, which has also influenced how high prices rise,” said Cornwall analyst Tom Edwards.

Twenty of EDF’s nuclear reactors have been stopped for checks on their steam generators, five more than would normally be shut down for maintenance at any one time. In July, EDF was forced to lower its 2016 nuclear output target to 395-400 TWh (terrawatt hours) from 408-416 TWh because of the need for “additional controls during the second half of the year” to show its reactors can operate safely. Last month, the group revised its nuclear output target again, from 380-390 TWh to 378-385 TWh.

A spokeswoman said it was looking at ways to ensure it could maintain electricity generation by using its thermal and hydraulic plants. She said EDF would buy more electricity on the European wholesale markets if necessary and use “contractual flexibilities with some industrial customers and individuals to limit their electricity consumption”.

Edwards said supply issues were currently to blame for price rises, but extra demand could soon be a factor. “The increase was primarily driven by rising wholesale prices, so the effect will be driven by supply and demand issues,” he said. “If it’s a cold winter and supply issues remain, then this should persist for the next three to four months. There has been some concern raised about how suppliers will cope over the winter if they aren’t able to hedge against these short-term price rises.”

 

Earlier this month, the Met Office predicted that the chance of the UK experiencing temperatures in the “cold” category was 30% – 1.5 times the usual risk – and warned that “contingency planners and others with sensitivity to cold weather might need to consider this elevated level of risk”.

Larger operators that generate their own electricity can protect themselves against rising wholesale costs. But this is not so for smaller operators. Earlier this month, Southend Energy, one of the larger independent operators, announced rises of 9% and 8.4% respectively on its fixed and greener tariffs.

“Some suppliers have increased the price of their fixed tariffs following the recent rise in wholesale energy prices, which is putting pressure on all suppliers’ costs,” said a spokesman for the energy markets regulator, Ofgem, which suggested many consumers could save about £300 a year by switching.

Edwards said the current uncertainty would be felt by consumers in the longer term. “Suppliers will increase their standard variable tariffs if costs do rise substantially, but this

will be affected by their hedging ahead of this winter. We would expect fixed tariffs in the future to be higher to take into account expected risk of short-term price volatility.”

B7EFWN ELECTRICAL POWER PYLON WITH SUPPLY CABLES OR LINES AGAINST A CLOUDY SKY ELECTRIC. Image shot 2008. Exact date unknown.

POWER PRICE SURGE Energy bills set to soar as Big Six gas and electricity giants prepare to pass on wholesale price rise

Sources say the average standard variable tariff could be set to rise 13 per cent from £1,063 to £1,201 per year

FAMILIES face a hike in their energy bills as power giants get set to pass on increases in the price they pay.

Wholesale gas and electricity prices are rising after a period of staying steady or falling.

 

Sources say energy firms are looking to pass on the price rises — despite The Sun’s campaign to highlight how customers are already overpaying.

It could see the average standard variable tariff rise 13 per cent from £1,063 to £1,201 per year.

Some firms could delay an increase as they “hedged” against wholesale costs rising by pre-buying power at lower rates earlier this year.

A source at one of the Big Six suppliers said: “Price rises are coming.

“None of us bigger firms will want to go first but it will come to a point where we have to.

“Hiking before Christmas will mean we get a lot of grief so firms will sit there now doing the maths to see how long they can hold off.

 

“The bigger ones can hold off a bit longer than the smaller ones.

“They pre-buy more power and also have deeper pockets to soak up tighter margins for a while.

“But don’t be surprised if some of the smaller suppliers raise prices.”

E.ON has already warned investors they have not hedged enough for their UK business.

 

Co-op raised the price of their standard variable tariff last month.

Critics said the Big Six are quick to pass on price rises but slow to pass on any savings.

Will Hodson, of consumer collective TheBig Deal.com, said:   “When wholesale prices dropped it took them forever and a day to pass those savings on.”

E.ON said it would not speculate on pricing.