The unseasonably cold weather that marked the turn of the decade has lingered across much of Britain throughout January and February; in fact, current weather forecasts predict that snowy conditions may continue into March, which will cause concern for many people who are already worried about their winter energy bills.

New research produced by confused.com has revealed that 73% of British households are deeply concerned about the increased cost of energy bills that have resulted from the adverse weather. With energy bills already at peak levels in many parts of the country, fuel poverty has become a phrase with which many consumers are now associated; furthermore, with the exception of a temporary reduction in gas prices by British Gas, it is more than likely energy bills will increase substantially across all suppliers over the next ten years as a result of renewable energy measures and supply and demand factors affecting natural resources.

However, despite having faced the coldest British winter in 30 years and having to endure ongoing economic instability, the research has also revealed that 10% of British households are largely unfazed by their energy consumption habits. In fact, 1 in 10 households have admitted that they leave the central heating on at relatively high temperatures throughout the day – even when nobody is home; indeed, it would seem these consumers place the desire for a warm empty home above financial and environmental costs.

Regardless of the financial implications of leaving central heating systems blazing away throughout the day just so the occupiers can return to a warm home, the environmental issue ought not to be dismissed lightly. It is estimated that millions of tonnes of greenhouse gases may be unnecessarily released into the atmosphere during winter by energy inefficient households. This problem is compounded by houses that have not yet installed loft insulation, double glazing and cavity wall insulation. Nevertheless, financial concerns usually prevail over environmental issues at the domestic level, so if consumers are undeterred by higher energy bills as a result of inefficient consumption it is unlikely their habits will be changed any time soon.

Ofgem, regulator of the gas and electricity markets in Great Britain, has sounded a further warning over the cost of energy bills facing domestic consumers. Speaking to BBC Radio Four, Alistair Buchanan, Ofgem’s Chief Executive, claimed energy bills could rise by as much as 25% in the years leading to 2020.

Mr Buchanan said: “The higher cost of gas and electricity may mean increasing numbers of consumers are not able to afford adequate levels of energy to meet their requirements”. The announcement follows growing concern within Ofgem that the unprecedented combination of environmental targets, dependency on gas imports, closure of defunct or ageing power stations and the global economic crisis will further hike up prices for consumers.

Furthermore, there is increased speculation the availability of oil will reduce sharply within the next few years. According to Sir Richard Branson, the “next five years will see us face another crunch – the oil crunch… Our message to government and businesses is clear: act. Don’t let the oil crunch catch us out in the way that the credit crunch did”. Independent oil consultant, Chris Skrebowski, who prepared a portion of the report for Sir Richard Branson, said that Britain is particularly vulnerable to the issue of peak oil, which “is likely to put pressure on the UK balance of payments and also likely to put a downward pressure on the valuation of sterling”. In other words, as Britain has shifted from an exporter of oil and gas to an importer, the country is much more dependent on external market factors and more vulnerable to price changes.

Ofgem’s renewed warning about domestic energy bills is also partly based on its proposed £200 billion upheaval of the energy sector, which it argues is required to produce a more efficient, effective, sustainable and affordable energy network. However, whilst it is thought that Ofgem’s £200 billion proposal will add £300 to the predicted £2,000 per year energy bills consumers can expect by 2020, the energy comparison website uSwitch has estimated energy bills could top £4,000 by this date if events continue to conspire against the UK energy market.

British Gas have today announced it’s cutting its standard gas prices by an average of 7% – this makes British Gas the cheapest electricity and gas supplier at time of writing. Customers can sign up online to British Gas WebSaver 6 online tariff or choose the standard tariff. The full announcement released this morning is as follows:

BRITISH GAS CUTS STANDARD GAS PRICES BY AN AVERAGE 7% – IS NOW THE CHEAPEST GAS AND ELECTRICITY SUPPLIER THROUGHOUT BRITAIN

British Gas, the largest residential energy supplier in Britain, has today cut its standard gas prices by an average 7%.

The price cut, which will benefit 8 million households, takes effect immediately and makes British Gas, on average, the cheapest supplier of standard gas and electricity right across Britain – no matter which way customers choose to pay. The change will save the average gas customer £55 a year.

This is the third time British Gas has cut prices in the past 12 months – cutting a total of £187 off the average annual dual fuel bill.

Last year, the company cut both standard gas and electricity prices by an average 10%.  The electricity price reduction in May 2009 made British Gas on average the cheapest supplier of standard electricity across Britain; it has remained unchallenged by any major supplier in this position ever since.

Today’s price cut means the company is now also the cheapest major supplier of standard gas at average consumption – and therefore of dual fuel – right across Britain.

Announcing the gas price cut, British Gas Managing Director, Phil Bentley, said:

“At British Gas, we know household budgets are stretched, and that our customers are concerned about the effect the recent cold weather will have on their winter fuel bills.

“I’m pleased we’re able to offer our customers some extra help with this gas price cut – and that we’re able to do this while it’s still winter, allowing our customers to really feel the benefit.

“This latest price cut means that, no matter where you live in Britain, British Gas is offering on average the cheapest standard gas, electricity and dual fuel prices – beating all other major suppliers.

“But, at British Gas, we know that cutting prices is just part of the picture in helping our customers cut their fuel bills; we’re also doing more than any other supplier to help our customers use less energy.  As well as cutting prices three times in the past year, we have been helping our customers improve their energy efficiency and cut their energy use by 7%.”

British Gas has also removed the price ‘differential’ for gas pre-payment meter accounts.  This means British Gas’ pre-pay gas customers are now paying, on average, the same for their energy as customers who pay by cash or cheque.  British Gas has, for some time, been working to become more efficient, improve customer service and cut costs for its pre-pay customers.

The Department for Energy and Climate Change (DECC) has recently outlined plans to install smart meters in all UK homes by 2020, which will require that some 48 million meters are fitted in approximately 26 million properties over the next ten years. Therefore, it should come as no surprise that the scheme is set to cost a pretty penny, with current estimates in the region of £8 billion.

Nevertheless, the DECC argues that the smart meters are necessary in order to effectively monitor domestic energy usage, which is essential if the country is to live up to the Government’s greenhouse gas emission targets. Moreover, as climate change strategies are currently under discussion in the Copenhagen Climate Change Conference, which is due to close on the 18th December this year, it is quite possible that existing Government targets will be revised in the new year.

In any case, the need to cut carbon emissions, which refers broadly to various greenhouse gases such as carbon dioxide and methane, is extremely important in a world that is thought to be heading towards climatic catastrophe. Notwithstanding this, domestic energy consumers will no doubt want to know precisely what smart meters are, how they operate and whether they will subsidise the bill of introducing them to homes throughout the country.

In respect to the latter question, energy companies in the UK will be responsible for installing the smart meters in homes, so no fee will be charged to consumers directly. However, it is estimated that energy bills will increase by around £15 per household per annum up to 2020, although £10 of this is expected to be covered by the savings generated from there no longer being a requirement for people to read gas and electricity meters. Nevertheless, it is thought that smart meters, which are capable of monitoring gas and electricity usage throughout the home in detail, will save consumers around £25 to £35 each year by providing them with real time information of their energy consumption and costs.

The rising cost of domestic energy bills has long been a cause of concern amongst UK consumers, watchdogs and charitable organisations. Indeed, millions of homes throughout the UK are now thought to be suffering from some form of fuel poverty, which refers to those who spend more than 10% of their household income on heating bills.

Unfortunately, fuel poverty is not merely the preserve of the near destitute – on the contrary, the term has managed to creep its way into the collective conscious of many millions of people throughout the country. As such, it was with considerable disappointment that Ofgem’s previous commentary on high energy prices was published without a clear direction for those ultimately responsible: the energy suppliers themselves.

On Monday, however, Ofgem released a warning to gas suppliers that energy prices must fall in line with the drop in wholesale gas prices by the New Year. As reported in the BBC online news service, Ofgem advised that gas suppliers must no longer “use investment as a shameful excuse to overcharge consumers”. In fact, the normally submissive regulator, whose main purpose is to ensure healthy competition exists between suppliers, has been quoted as saying it “will not shy away from proposing radical reform to protect the interests of consumers”.

Although Ofgem’s warning is anything but specific, it nonetheless marks a departure from its previous stance of ‘observe and report’, which had lacked any kind of bite that would upset energy suppliers. Nevertheless, it remains to be seen whether Ofgem has grown teeth since its last discussion on low wholesale fuel prices and disproportionately high consumers bills. In the meantime, fuel poverty is an issue that is probably going to worsen unless suppliers reduce bills. In fact, the latest figures for 2009 suggest that almost 5 million households in England alone are suffering from fuel poverty, which is why Ofgem’s interim advice to consumers is to shop around for the best deals, as this could save around £200 on the typical annual bill.

It is no secret that domestic energy prices are likely to rise over the coming years, as a combination of general supply and demand issues affecting fuel and the post-recession drive for investment in green energy technologies conspire against consumers. Unfortunately, as mentioned in previous posts, many of the wholesale fuel costs – and none of the savings – are passed on to domestic energy consumers, whose annual bills are growing higher each year.

Following Ofgem forecasts of energy bill increases up to 60%, recent news of further rises will likely anger many consumers. Indeed, outrage will undoubtedly ensue as the current UK Government is reportedly planning to subsidise the building of several new nuclear power stations through further taxation of electricity customers.

Nuclear power is a key component of the green energy strategies outlined by both the Conservative Party and the existing Labour Government. Unfortunately, building nuclear power stations is a multi-billion pound endeavour that energy companies are generally reluctant to shoulder themselves. Indeed, ministers have become increasingly concerned over failures to commit to nuclear investment by leading energy companies such as E.ON and EDF Energy, who argue that current energy prices make such investment unaffordable. Of course, according to Ofgem’s forecasts, all options lead to increased domestic energy bills and it has already been established that lower wholesale fuel costs are resulting in enormous profits for energy companies at the present time.

Nevertheless, it would seem that regardless of which party is successful at the next UK General Election, nuclear reactors will be built in Britain for the first time in over 20 years. The question is how much of the costs associated with such development will be shouldered by consumers? Unfortunately, in the case of the current UK Government’s initial plans, the so-called nuclear tax would add £44 to an annual electricity bill of £500.

It was reported recently Ofgem, which is responsible for the regulation of electricity and gas markets across Great Britain, feared UK domestic energy bills would rise despite increased profits for the leading energy companies.

Although Ofgem clarified that it was powerless to interfere with the prices set by energy companies such as E.ON and British Gas, it advised that savings from lower wholesale fuel costs were not being passed on to consumers and the major energy companies were contemplating further price rises. Following a detailed study by Ofgem, four probable scenarios have been identified in respect to the future of domestic energy and, unfortunately for consumers, all involve a hefty rise in prices.

The first two scenarios outlined by Ofgem refer to the drive for renewable forms of energy. Ofgem has proposed that the various green energy initiatives will take their toll on domestic energy companies and, in turn, its consumers. Under the Green Transition scenario, Ofgem argues rapid economic recovery and expansion in green renewable energy measures will lead to a decreased demand for gas but a significantly higher demand for electricity. Domestic energy bills will rise 23% by 2020 under the Green Transition model. According to the Green Stimulus scenario, consumer bills will rise by 14% in the same period as a result of slower economic recovery and green investment.

Another rise of 22% is predicted if the Slow Growth model takes effect, with the economy proving lethargic in shaking off the recession. However, the main threat to consumer bills appears to be that of a Dash for Energy scenario, which will see domestic bills rise by a massive 60% during the same period. Under the Dash for Energy model, Ofgem predicts international security concerns will take precedence over environmental targets, which will ultimately result in increased competition between nations for limited fuel supplies.

Good news for consumers as the energy companies are set for a full scale price war this winter. According to the energy companies, ‘officially’ the 1st October is the beginning of the winter period, which lasts through until the 31st March. This new pricing period will mean new tariffs for some of the UK’s biggest energy suppliers. However, you do not get something for nothing in this life and to benefit you have to be “in it to win it”, so to speak!

Customers have to elect to change their pricing tariffs in order to benefit from cost cutting deals (such as duel fuel). Research by Moneysupermarket has shown that the difference in savings between a standard tariff and a companies ‘best deal’ can be around £240 a year. However, Ofgem, the energy regulations board, have conducted research which shows that up to ten million households (nearly forty per cent of all homes) are stuck on standard tariffs!

So, if you want to take advantage of some great deals, such as British Gas’s WebSaver 4 tariff which is currently £134 cheaper than the standard tariff, or Scottish Powers duel fuel 7 tariff, which is a whopping £387 cheaper than their standard tariff, then you need to pick up the phone, or go on-line and get yourself the best deal! Also ask your energy supplier if you can benefit from paying your bill on-line, or by direct debit each month, as these payment methods will often be rewarded with additional discounts.

It is also worth noting that tariff rates are normally based on ‘medium’ users (as opposed to light or heavy users), so check out your usage before committing yourself and make sure you really are getting the best deal possible.

On the back of a deep recession, from which the British economy is only just beginning to emerge, it is unfortunate that times are unlikely to improve for many domestic energy consumers. In fact, there are indications that energy prices are likely to rise over the winter and, if there is one term that has punctuated the plight of millions more than any other during the recent global downturn, it is ‘fuel poverty’.

Unfortunately, fuel poverty, which essentially describes the condition of being unable to afford adequate energy supplies, is a problem that already affects the most financially vulnerable in the community.

Therefore, it is with considerable dismay that Britain’s leading six energy firms, which comprises British Gas, EDF Energy, E.ON, RWE, Scottish Power and Scottish and Southern Energy, have rejected calls to reduce domestic energy bills. Whilst this is unsurprising in itself, the failure to lower prices must be framed in the context of falling wholesale energy costs. Indeed, Ofgem, which called for lower domestic bills but is only responsible for regulating the competitiveness of the energy market, has already conceded that the leading six energy firms are set to increase their profits if the lower wholesale prices are sustained. As there is no indication that wholesale prices will increase in the near future, the energy companies’ failure to pass on these savings to customers is objectionable to say the least.

Furthermore, with the news that domestic bills are likely to increase over the winter, this discrepancy is set to widen further. To put the matter in perspective, despite the energy companies’ claims that other costs are pushing up prices, they will receive an average annual gross profit per consumer of around £170, which compares to £110 over the past three years.

A rumble of thunder sounds overhead before the first flash of lightning electrifies the night sky. The satellite television is holding out as the winds pick up and rain begins to lash down. All is safe and cosy at home – until the power goes off.

Unfortunately, this is a familiar tale for many domestic energy consumers across the UK, who suffer power cuts as a result of various acts of nature, including flash floods and electrical storms. According to a study published earlier this month by LogicaCMG, Britain is heading towards major energy shortages within the next fifteen years possibly resulting in mass power cuts.

However, since their publication, these claims have been refuted by the Secretary of State for Climate Change and Energy, Ed Miliband, who advised that the UK is rapidly expanding its energy network with a number of new power stations. Whether this will be sufficient to avert the predicted energy deficit remains to be seen.

Nevertheless, Central Networks, which is responsible for delivering power to some 9.4 million homes across central England, has decided its own operations require closer scrutiny. Power cuts relating purely to acts of nature and problems with the infrastructure remain more pressing than those predicted by future energy shortages.

Central Networks’ Customer Panel has been launched to tackle everyday outages and help improve the infrastructure for years to come. In fact, Central Networks hopes it can use customer feedback to shape its networks for the future. Indeed, by giving the average utility customer a voice, Central Networks will be able to tackle a range of issues such as those relating to climate change, energy theft and weather emergency planning.