Isra-Mart srl: Government sets out plans to tackle rising energy costs

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Chris Huhne, the energy secretary, has said the government can deliver some "real hits" on household energy bills by giving the country's biggest gas and electricity providers a tougher time.

Consumers will be encouraged to take steps to reduce their energy bills amid growing concerns in Whitehall over the sharp increase in prices.

Huhne and David Cameron will outline the measures after summoning Britain's six biggest suppliers to a special energy summit in London on Monday.

In a joint article previewing that event, the energy secretary and the prime minister express their determination to see a fall in prices.

Huhne will point out that a small proportion of the increase in energy bills over the last year - just £20 - has been caused by Britain's renewable energy obligations. The bulk of the increase has been caused by the dramatic rise in gas prices.

Speaking before the meeting, Huhne told BBC Radio 4's Today programme that the government would be on the consumers' side to ensure they got a better deal.

He said the government's prediction, and that of virtually everybody else, is that bills were going to go up in the medium term. But while the energy companies were not "the Salvation Army", and expected to earn respectable returns, Huhne continued, they needed to operate in a fair and competitive market.

The energy secretary said the long-term aim was to stop Britain being so reliant on fossil fuels from "volatile parts of the world" by developing domestic sources from renewable and nuclear, but in the short run, a more competitive UK market was key.

Huhne said 99 per cent of household energy in Britain is provided by the "big six", and that 85 per cent of consumers never consider switching supplier, so the task at hand was: "Can we actually, by making the market more competitive, get a better deal here in the UK?

"We want people to check their tariffs, we want people to switch to cheaper tariffs and we want people to take advantage of the free offers that there are to insulate their homes so they can protect themselves from rising bills this winter," he said.

On rising energy prices, he added: "If we think that fossil fuel prices are going up and up and up, over time, they're moving to renewable energy, moving to nuclear, which is going to insure British consumers against the sort of world gas price increases that we've seen over the last year, that's the sensible course of action.

"In the short term we can get some real hits for consumers by making sure that tariffs are simplified, that it's easier to switch [energy provider], that we can actually provide the 'big six' with a tougher time, and we are on their side in doing that."

Huhne has been critical of consumers who fail to shop around for the best energy prices. But in an interview with the Sunday Times, he placed the burden on energy companies.

"We know what's wrong with the energy market and we are addressing it," he said. "There have been clear examples of malpractice, and Ofgem has found that people don't switch even though it could provide them with big savings."

Phil Bentley, managing director of British Gas, said he welcomed an honest conversation at Monday's summit about the reality facing Britain's energy industry, as well as discussing what can be done to reduce energy bills this winter.

Pressed on the findings of a recent Which? survey showing that consumers are being misinformed about the best deals, he agreed that the industry needed to do more to win customer confidence.

He said his company would be writing to all its customers on Monday to ask them if they were on the right tariff. "If there are better tariffs that are appropriate for customers then they would switch to that."

But Bentley admitted the number of tariffs was confusing for customers. "We welcome a debate today about transparency to ensure we have some clear way forward to give customers absolute choice."

He said unit prices for energy were going to go up in the UK, which has the lowest gas prices in western Europe, and blamed the rises on the international markets. The way to keep energy bills down was through "using less units, by making homes as energy efficient as possible", he added.

"In my opinion, unit prices will only go one way unless someone discovers huge amounts of gas and imports it into the UK. The international price for gas, I'm afraid, is going up."

He said the industry profits as a whole last year were not high, given the huge investments needed in the sector.

Caroline Flint, the shadow energy and climate change secretary, said: "The government's warm words won't heat homes during a bitter winter. They're unable to take on vested interests, they won't tackle the spiralling prices imposed by the energy giants, they won't investigate the mis-selling of energy and they won't help the pensioners whose winter fuel payments have been cut.

"Unless the out-of-touch government gets to grips with the real issues at the energy summit, their only promise is a cold, costly winter for all."

Energy companies were attacked by the Labour leader, Ed Miliband, in his keynote speech to the Labour party conference last month when he called for "irresponsible, predatory" industry practices to be challenged .

Miliband accused the big energy companies of being involved in a "rigged market" as he called for a break-up of their dominance.

Huhne and Cameron insisted that the next stage of Ofgem's retail energy market reforms, announced on Friday, would force energy companies to sell more of their electricity on the open market.

In the MoneySavingExpert.com article, Huhne and Cameron wrote: "These radical reforms will completely overhaul and simplify tariffs, protecting consumers from price rises and hidden charges and encouraging new players, like supermarkets and co-operatives, to enter energy markets by forcing suppliers to sell more of their electricity on the open market."