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Energy price rise hits students hard

Six million UK households, including a large number of student households, are suffering from a 15% hike in fuel bills as one of Britain biggest energy suppliers, npower, confirmed details of a new year price rise. Charlie Baylis reports

ELECTRICITY PRICES for customers of Britain’s forth largest energy provider will increase by 12.7%, while gas bills will see a 17.2% increase. The price rise will increase average npower customers combined gas and fuel bill to over £1000.

Students whose gas and electricity is supplied by other firms will not be affected by the price rise. However, industry experts have warned that the npower move will act as a signalling function for the other firms, who will almost certainly follow through in raising their own prices to protect their profit ratios.

The potential round of price rises has been blamed on rocketing oil and gas prices, oil soared to over $100 a barrel for the first time in history on the 2nd of January. Britain has also become largely dependent on expensive imports to fuel its power stations. Npower also claimed that the price rise reflected the cost of matching government energy efficiency targets.

“The decision was not an easy one,” alleged npowers managing director of residential business Giuseppe Di Vita, in defence of the price hike. “We always try to protect our customers for as long as possible but sadly higher energy prices are a fact of life.”

However, charities have warned that the price rises will have a great impact on the more vulnerable members of society. The fuel poverty charity National Energy Action said that the price increases represented “deeply worrying news” for low income households.

The market for energy in the UK is referred to in the world of economics as an oligopoly. The word derived from the Greek for few sellers. Oligopolies exist where a small number of large firms compete for market share, other examples of oligopolies in the UK include the supermarket industry.

Prices are normally fairly stable in oligopolies, as the firms are in fierce competition with each other. However, industry experts have also warned that the npower price hike marked an end to months of stable or falling bills.

Paul Green, chief executive of Energyhelpline.com warned: “Wholesale energy prices are going to rise for at least two to five years.” This will feed into continuing, unpopular rises in the average student’s fuel and gas bill.