12/02/07

As a follow-up to a recent journal entry on rising petrol prices, I found an article this morning that forcasted a possible very chilly winter for consumers. Analysts have warned that a 15 per cent increase in gas bills in the new year may be the result of higher wholesale gas prices. Suppliers such as Npower and British Gas are expected to start raising charges in February, while Russian gas giant Gazprom, which supplies a quarter of Europe's gas, announced last week that European consumers should expect prices to rise by almost a fifth.

Title: Cold comfort for gas customers with bills set to soar
Date: 12/02/07
Source: The Observer

Allan Asher, chief executive of consumer group Energywatch, thinks raising the prices is a scam. He accused the industry of 'tacitly colluding' to talk up the price of wholesale gas to justify charging higher rates. Tactics included exaggerating the possibility of cold weather or supply problems, he said. 'Warning of higher prices becomes a self-fulfilling prophecy. It's a way of softening the market ahead of a rise.' Also, it may be interesting to learn that in the past year, wholesale gas prices have fallen by 50 per cent, with wholesale electricity costs down by about 30 per cent. Yet utility bills have only fallen by a fraction of that amount. The average gas bill for an Npower customer is only 15 per cent less than a year ago and British Gas, the UK's the largest gas supplier, charges 20 per cent less than last year.

A spokesman for parent company Centrica said: 'British Gas intends to remain competitive as we have been all this year after leading the industry down in March and April.' Gazprom negotiates its annual gas export contracts in December. Two years ago it threatened to turn off the taps after gas negotiations with neighbouring Ukraine broke down, sending prices in Europe soaring.

Whether raising the gas prices is a scam or not, an increase in gas bills is going to happen. If it indeed happens to be a scam, I personally think its a shame to make consumers suffer just so the gas industry can soften the market ahead of a rise. If gas companies wanted to remain competitive, as British Gas intends to be, shouldn't they work to keep gas prices lower while all of the other companies raise their prices? That way more people would switch to their company therefore making them successfully competitive. On top of remaining competitive, everyone would benefit: consumers would be getting gas at a lower price and the gas company would still be able to soften the market without raising prices because of their increase in clientele. This method makes more sense to me rather than talking up the raise in wholesale gas prices to justify raising prices. Perhaps the increase in wholesale gas prices is more severe than I am making it out to be, but I just don't see the sense in increasing gas bills when it could be avoided.