3rd Feb 2017 13:19
LONDON (Alliance News) - Big Six energy supplier Npower sparked concerns on Friday after announcing the cost of a typical annual dual fuel energy bill will rise by 9.8% from March, increasing annual bills for customers on variable tariffs by an average of GBP109.
Npower, formerly listed on the FTSE 100 when it traded as Innology until being acquired by Germany's RWE in 2002, said the price increase will impact only half of its customers and stressed that it has not raised its prices since October 2013.
The business blamed rising wholesale energy costs and the rising costs of delivering government policies such as smart metering, the renewables obligation and the capacity market.
The price rise, Npower said, is comprised of a 4.8% lift in gas prices and a 15% rise in electricity prices, and will come into effect on March 16.
Around 1.4 million Npower customers will be hit with higher bills, with Npower's other 1.4 million customers fortunate enough to be on fixed-rate tariffs. The company said it has a higher percentage of fixed-rate customers than its peers that make up the rest of the Big Six - British Gas owner Centrica PLC, SSE PLC, ScottishPower, EON and EDF Energy.
Npower also confirmed that prepayment customers - typically the most vulnerable customers that are required to pay upfront for the energy - are unaffected by the price rise.
"Npower is also launching an exclusive four year fixed term tariff for our current standard customers, where the exit fee has been waived in recognition for their loyalty," said Npower. "Today's increase includes a change to nPower's standing charge of GBP55 for electricity, bringing it in-line with the rest of the market."
"Since npower last raised its prices three years ago, there have been increases in wholesale energy costs and rises in the cost of delivering government policies, such as smart metering, renewables obligation and the capacity market. This trend is set to continue, with network and policy costs representing an increasing share of domestic electricity bills," said the company.
Smart meters are being imposed on the industry and the government has charged suppliers with installing the meters, considered to provide more accurate readings, in all UK households by 2020.
As for the government policies, the renewables obligation helps support the development of renewable energy generation and was introduced in 2002, providing an obligation on UK electricity suppliers to source an increasing proportion of the electricity they supply from renewable sources.
The capacity market is the government's tool to ensure enough energy capacity is being developed across the country to ensure there is enough supply coming online to meet future demand and to replace those power stations that close.
"This is a hugely difficult decision, and we?ve delayed the date this takes effect until after the coldest months of the year. We?ve also made sure that our most vulnerable customers won't see any impact until May," said Simon Stacey, managing director of the company;s domestic markets.
"Npower operates one of the broadest range of support schemes of any supplier, offering the widest and most diverse care programmes for vulnerable customers and those who are struggling with their energy bills," he added.
The Times commented that there will be a "huge political row over this", implying other members of the Big Six could follow now that one of them has "dared stick its head over the parapet".
"Ofgem, the industry regulator, said only two weeks ago that suppliers should be able to absorb higher wholesale costs, so the price increase seems to fly in the face of that. It will only add to fears that inflation is on the rise again, to the detriment of the British economy," the Times reported.
Following the news, London-listed Centrica shares were up 0.6% to 226.80 pence per share while SSE shares were down 0.3% to 1,477.10 pence.
By Joshua Warner; [email protected]; @JoshAlliance
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