Fuel bosses to get a rocket

Energy firms are likely to get a kicking from MPs today about the rise in our fuel bills...

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Last Updated: 31 Aug 2010

Centrica boss Sam Laidlaw and representatives from firms like Npower, EDF and Eon have been appearing in front of the Commons Business and Enterprise Select Committee this morning, asked to explain what they plan to do with our fuel bills over the coming months. Most have already increased their prices at least once this year – and with further hikes widely expected before long, we could be in for a pricey winter...

Of course the issue for these energy firms is that it’s been getting more expensive for them to get hold of the gas they supply to us. With the oil price continuing to climb (it’s currently hovering just below $140 a barrel), the cost of buying gas on the wholesale market has also been increasing steadily – by 70% so far in 2008, according to industry figures. So eventually, they’re going to have to pass this cost on to us.

But the worry is that we’re already spending significant chunks of our income to keep up with the gas bills. The Government admits itself that 2.5m people are already in ‘fuel poverty’ (i.e. they spend at least 10% of their income on gas), while watchdog Energywatch reckons the true figure is actually nearer 4m. If prices climb by 40% - as some analysts are predicting - that’s going to spell trouble for a lot of people.

So the Committee is likely to be focusing on what these companies plan to do to make life easier for those in the greatest need. Regulator Ofgem has already suggested a plan to share information about people with low incomes, so the Government and the gas companies can do a better job of targeting their financial assistance. But equally, Laidlaw and co have a duty to their shareholders to fight their corner, so that they don’t end up out of pocket as a result. 

Still, if you were in any doubt about how lucrative a business this can be, witness BG Group’s £7bn all-cash bid for Australian coal seam gas producer Origin, which has just gone hostile. BG (part of what used to be British Gas) has already offered a 48% premium to the original share price – and it looks as though Origin wants to hold out for more.

These days, as the advert used to say, that’s the beauty of gas...

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