MPs: Industry at risk from energy price hikes

Energy market needs urgent reform, say MPs

Monday, 28, Jul 2008 01:40

The government must reform Britain's wholesale gas market to avoid thousands of potential job losses across industry, MPs have warned.

The business and enterprise committee found industrial consumers now face prices above European levels.

In its report, the committee said: "If these price differentials are sustained, they will affect the competitiveness of the UK economy, and put many thousands of jobs in manufacturing at risk."

The committee criticised regulator Ofgem, the government and suppliers in its report into the state of the energy market.

Gas prices have soared since the beginning of the year, and suppliers recently warned prices could rise by as much as 40 per cent.

On Friday, energy firm EDF raised its power prices by 17 per cent and its gas prices by 22 per cent, claiming rising wholesale costs.

If this is followed by similar rises from other suppliers, another one million people could be pushed into fuel poverty, watchdog energywatch said.

The MPs' report highlighted "concerns that Ofgem's current investigation is not giving more explicit attention to the wholesale gas market", recommending the watchdog "urgently" investigates why gas producers seem unwilling to trade in the forward market, which may ease prices.

Ofgem should also investigate whether the dominance of the 'Big Six' energy firms is preventing new, smaller entrants to the market, the committee said.

The government also came under fire in the report for reducing the budget for fuel poverty, defined as those who spend over ten per cent of their income on fuel costs.

Chairman of the committee, Peter Luff, said: "It is clear that there are very real problems in the energy markets at all levels, and going beyond these six companies, which need to be addressed.

"Ofgem, though, is going to have to demonstrate a rather greater sense of urgency than has been apparent so far."

Mervyn Kohler, special adviser for Help the Aged, said: "The select committee has fired some well-aimed bullets at government, the regulator, and the industry, and its report demands a timely and positive response.

"The government must urgently reinvest in Warm Front and improve the housing stock of the fuel poor – to reduce both energy bills and carbon emissions."

The news comes as pressure increases on the government to do something about fuel poverty before the winter arrives.

Liberal democrat leader Nick Clegg said: "Many people will wonder how energy companies can enjoy a massive subsidy at a time when many families are facing an increasingly desperate struggle to pay their energy bills.

"This multi-billion pound windfall should be used to protect the most vulnerable people from the effects of fuel poverty."