E.ON UK to raise its gas prices by 18.4%, power by 9.7%

E.ON UK to raise its gas prices by 18.4%, power by 9.7%

London (Platts)--17Aug2006

E.ON UK, which sells energy to households as Powergen, is to raise its
gas bills by 18.4% and its power bills by 9.7% from August 21, 2006, it said
Thursday. The company blamed soaring wholesale energy costs.
The move comes as part of a wave of increases from the six main household
energy suppliers in the UK. Centrica, EDF Energy and Scottish Power have
already increased their prices in this wave. Industry observers believe RWE is
likely to increase its prices soon, as it is currently priced below the others
(see table) and has not pledged not to increase its prices, unlike Scottish
and Southern Energy.
E.ON UK said that over 10% of its customers would not be affected by
the increase because they were on capped or fixed price products. It said
customers could now take out a Price Protection 2010 product which would
protect against further price increases until 2010, with no tie-in or
cancellation fee.
"Despite this increase, for the average customer, we are still over 10%
cheaper than British Gas," said Nick Horler, the managing director of retail
operations.
In the first half of 2006, E.ON UK's adjusted earnings before interest
and tax fell 26% from the same period of the previous year to Eur451 million
($578 million), so it had been expected that the company would raise its
prices again in an attempt to build its profitability back up.
Consumer group Energywatch was upset by the move. Campaigns director Adam
Scorer said that people shouldn't just accept the argument that rising
wholesale prices made higher bills inevitable. He said maybe the entire
structure of the industry was wrong.
"After ten years of competition it is high time to review whether
consolidation and vertical integration is a model of competition that benefits
consumers," he said.
"With millions in fuel poverty, government and industry must come up with
an effective strategy to protect those vulnerable consumers most in need."

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