Pricing

Contrary to media reports last year, we do care about the impact that rising energy prices are having on our customers. But global commodity costs rose sharply in 2008, so we had to share some of those costs with our customers – through higher bills.

Global price rises

In January 2008, we announced an increase in our residential prices and in August 2008 we increased our prices again. On both occasions, the increases were due to massive rises in wholesale prices, which made our residential prices unsustainable. The other 5 major UK energy companies also increased their prices twice during 2008.

We are aware that our customers need to budget, so we always aim not only to give them a competitive rate, but to protect them from the volatility of the wholesale energy market through the effective purchasing and hedging of our wholesale costs and risks. Until we put our prices up in August, our domestic gas prices were at the same level as they had been 18 months previously – even though the cost of wholesale gas doubled over the same period. Additionally, electricity generation was also hit by soaring raw material prices.

Rising wholesale prices are not the only reason we face higher costs. Like other energy suppliers, we’re facing substantial increases in distribution and environmental costs.

Over the next three years, we will spend over £400 million helping customers reduce the amount of energy they use through free or subsidised energy efficiency measures. We’re also investing approximately £50 million in social programmes for vulnerable customers.

Over the next 10 years, we’ll be investing around £1 billion a year to build a new generation of power stations to ensure we can continue to meet the UK’s energy demands in the future.

Helping our customers now

In these uncertain times, our customers are concerned about staying on budget, getting the best rate and using less energy. To help them, we launched several new products, such as fixed-price tariffs.

In 2008 we also brought our pre-payment meter tariffs for both electricity and gas down - into line with our standard cash and cheque tariffs. In addition, customers in our core areas – Yorkshire, the North East and West Midlands – who aren’t connected to mains gas have seen their annual electricity bills cut by £20. This was in response to Ofgem’s findings that there are existing loyal customers who have not had the chance to benefit from our dual-fuel discounts.

Open dialogue

The reasons for price rises can be complicated. To help make them easier to understand, we launched a new website last year: www.thebrighterenergydebate.com. It explains the complexities of the energy industry and discusses the issues that affect us all – from energy bills to energy efficiency.