In recent months, five of the “Big 6” energy companies have once again raised their prices for both gas and electricity.  They said this was because the wholesale price has risen and this needs to be fed back to the customer.  The five companies are SSE, British Gas, Npower, Scottish Power and EDF, with only EON not raising their prices (yet).  However, a new scandal has started and it seems that some 50% of our energy bill rises are actually unsubstantiated…

Seth Freedman’s Allegation

Seth Freedman is a whistle blower and he has said that the energy wholesale prices are artificially manipulated.  This is very similar to the bank’s Libor rates, another huge scandal to hit us in recent months.  It is believed that both business and domestic properties are affected by this.  In fact, at least 50% of an energy bill is the wholesale price, so if this is kept artificially high, our bills are artificially high too.

Why We Fall for This

The Big 6 are called this for good reason.  They are the six companies that everybody knows.  If all of these, or at least most of these, say something is true, we are likely to take their word for it.  And this is exactly what they were banking on.  This is how they make their money, because they know we will pay for our energy no matter what.

28 September 2012

The 28th of September 2012 is a crucial date in this whole scandal.  Basically, all the major energy contracts would come to an end a week afterwards.  If energy companies were able to make the price rise before they renew their contracts, and then lower them again afterwards of course, they could justifiably push through a rise in their energy prices.  And this, it seems, is exactly what has happened.  Graphs of the wholesale prices do show that there was a sudden rise in energy prices of 6% and that these prices have now, after the new contracts have started, once again dropped. 

Some energy companies, including British Gas and Centrica, use their own gas fields.  However, they have to transfer the purchase of this gas and they do this by offering it at a wholesale price, as they should.  So companies like this potentially benefit even more!

Business and Domestic Users

Naturally, these price increases will affect both businesses and domestic users.  Although it is terrible for domestic users, their price increases are reasonably low.  Naturally, even a small increase in prices will be felt in the pocket.  However, businesses are hit significantly harder, because they already have bigger bills.  The added problem with this is that it means businesses have to tighten their belts even more, potentially impacting their staff.  This could have a snowball effect of people having to get laid off and made redundant, who then have to go home with no money, where they have to pay higher energy bills.  We must remember that these allegations are just that: allegations, but the reality is that energy prices have definitely gone up once again.