EDF announce price rises as pressure cranked up on government to deliver on green tax promises.
EDF Energy has announced price rises of 3.9% for their gas and electricity, effective immediately from 3rd January 2014.
The company highlighted that the increases were under half of those instigated by their energy counterparts and estimated that it would only add around £50 to the average consumers bills.
The announcement means that five of the country’s ‘big six’ energy firms have now confirmed price rises for this winter with British Gas, SSE, Scottish Power and Npower all previously going public about the increases.
It is thought that around 2.4 million houses across the UK will be impacted by the rises, though EDF have cited that their customers would still be making an £80 saving compared to their consumer counterparts using the other ‘big six’ energy firms.
Only E.ON now remain as the sole energy firm of the ‘big six’ to announce price rises, though the company are expected to make a similar announcement in the upcoming weeks.
In a statement early this morning, EDF said: “The Company recognises that a price rise is especially unwelcome in the current economic climate, but believes that today’s action to limit the growth of bills is an important step,”
Green tax dilemma
The news comes on a day where energy bosses of the country’s top firms are set to appear in front of government committee to try and justify their current conduct about price rises.
British Gas, SSE, Scottish Power and Npower all previously cited that it was the rising cost of wholesale energy and growing costs of green taxes that had spurred them into raising their prices.
EDF has however strayed away from its fellow counterparts when justifying the price rises, identifying that the impact of rising green levies costs did not play a part in determining the increase.
It also went against suit and highlighted that rising wholesale energy costs had only resulted in a 0.1% increase in their bill costs.
The biggest cited factor in their price increases were the rising costs of distributions, which the Company argued made up 1.9% of the 3.9% increase because network distributers were charging more. Renewable commitments were also a key factor in the price rises, with 0.5% of the rise attributed to it.
The firm has warned that further price rises were likely if the government failed to deliver on its promise to ‘roll back’ green taxes next year, meaning that the pressure is well and truly on the government now to deliver on its promises to consumers.
Government officials will be required to review the entire ‘green tax’ system and consider changes to lower the costs of energy bills. Importantly, they will have to determine whether the £160 a year charged to consumer energy bills through these environmental charges should be put into standard taxes to alleviate the financial burden of rising energy bills.
Its statement read: “The Company has taken action ahead of the outcome of the Government’s review of the costs of ECO and other schemes.
If the Government makes bigger changes to the costs of its social and environmental schemes than EDF Energy has anticipated, the company pledges to pass these savings onto customers.
However, if changes to social and environmental programmes are less than anticipated, the company may have to review its standard variable prices again.”
The company identified that the small nature of their increases meant that they would most likely not be able to acquire a profit on its residential supply business in 2014, but outlined that its commitment to its customers was more important.
EDF chief executive Vincent de Rivaz called for officials in the energy business to “challenge the cost and affordability” of government green schemes.
“Something can and must be done for consumers,” Mr de Rivaz added.
Spotlight on the government
EDF’s different conduct to its energy counterparts is undeniably credible and marks the first positive course of action that an energy firm has pursued on behalf of consumers.
The company did warn that they would raise prices if the government failed to deliver on its promises about ‘rolling back’ green taxes, but identified its intention to remain transparent and affordable to customers.
Mr de Rivaz added: “I know that price rises are always unwelcome, but we have taken the first step to show what can be done if rising costs are tackled head-on.”
The company’s actions have also found praise from market experts, who have highlighted that the spotlight is now on the government to deliver on the promises it made to consumers.
The energy minister, Ed Davey, has also reserved lukewarm praise for EDF’s announcement, though has optimistically highlighted that it could mark the beginning of a transition in the energy market to more competitive prices.
The government has sought to encourage people to switch supplier in a bid to encourage competition between the country’s major energy firms. It is thought that they hope to lower prices in this manner, by forcing providers to engage in price wars to retain customers under their service.
Mr Davey said: “Any price rise is disappointing but I’m encouraged b that EDF have kept their price rise much closer to inflation than some of their competitors.
“The competition we’ve introduced to the energy market means people have a choice. They can look for the best deal available; including from smaller suppliers, with the confidence that switching will make an immediate difference to their bills and force the Big 6 to compete on price.”