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Energy chiefs made to justify price rises to MPs Energy chiefs made to justify price rises to MPs
(35 minutes later)
MPs have started to question the bosses of the UK's six biggest energy companies. MPs are questioning the bosses of the UK's six biggest energy companies.
They have been called in front of the Energy and Climate Change Committee (ECCC), to justify recent price rises. They have been called in front of the Energy and Climate Change Committee (ECCC), to justify their recent price rises.
So far, four companies have announced increases that average 9.1%, with the others expected to follow suit. So far, four of the companies have announced increases that average 9.1%, with the others expected to follow suit.
The four firms involved have insisted that the rises were largely due to increasing wholesale prices.The four firms involved have insisted that the rises were largely due to increasing wholesale prices.
William Morris, the managing director of SSE, told MPs that his firm had faced a 4% increase in wholesale costs over the last year.William Morris, the managing director of SSE, told MPs that his firm had faced a 4% increase in wholesale costs over the last year.
He said the cost of transporting energy to homes had risen 10%, and the cost of government and environmental schemes had risen 13%.He said the cost of transporting energy to homes had risen 10%, and the cost of government and environmental schemes had risen 13%.
But the regulator, Ofgem, has argued that wholesale prices have risen by less than the rate of inflation.But the regulator, Ofgem, has argued that wholesale prices have risen by less than the rate of inflation.
Its data suggests that wholesale electricity and gas together have risen by just 1.7% over the last year.Its data suggests that wholesale electricity and gas together have risen by just 1.7% over the last year.
It estimates the net effect of wholesale gas prices on a household bill should be just £10 extra on a bill of £600.It estimates the net effect of wholesale gas prices on a household bill should be just £10 extra on a bill of £600.
Stephen Fitzpatrick, the managing director of Ovo Energy, told MPs that wholesale prices paid by his company were actually falling.Stephen Fitzpatrick, the managing director of Ovo Energy, told MPs that wholesale prices paid by his company were actually falling.
"I can't explain any of these price rises," he said."I can't explain any of these price rises," he said.
Transparency 'Filibusters'
MPs also asked the energy bosses whether they were buying energy from different parts of their own business, and so inflating prices.MPs also asked the energy bosses whether they were buying energy from different parts of their own business, and so inflating prices.
Most of them have a separate generation business, as well as a retail business.Most of them have a separate generation business, as well as a retail business.
Guy Johnson, the external affairs director of npower, denied that was the case. Guy Johnson, the external affairs director of Npower, denied that was the case.
So too did Tony Cocker, the chief executive of E.On.So too did Tony Cocker, the chief executive of E.On.
"There is no cross-subsidy between the two businesses. We operate them as stand-alone businesses," he said."There is no cross-subsidy between the two businesses. We operate them as stand-alone businesses," he said.
MPs on the Energy Committee also want to know how the transparency of the energy companies' finances can be improved. The bosses were also asked about the level of profits in their retail arms.
"They are distrusted," said Tim Yeo, the former Conservative chairman of the ECCC. Guy Johnson of Npower said they had invested £2.9m in the UK in the last five years.
"They've got to be more open about their costs," he told the BBC. "We've invested 100% of what we have earned in the last five years from generation," said Tony Cocker of E.On.
"I speak for a company that is proudly operating power stations and proudly investing in new power stations to ensure the lights stay on."
But Stephen Fitzpatrick, of the Ovo Energy, said the big companies were charging 10% more than they should be.
"We're all trying to tack down where this money is going, But you will never find it," he said.
"These guys are the best filibusters in the business."
Transparency
MPs on the Energy Committee also wanted to know how the transparency of the energy companies' finances can be improved.
"Do you understand that the people in this country do not trust you?" asked John Lavery MP.
"I completely agree with you," said Tony Cocker.
"But we have worked very hard to improve our business and simplify our tariffs," he told the MPs.
In a letter to the committee, Ian Peters, the managing director of energy at British Gas, admitted that there was further work to do on that.In a letter to the committee, Ian Peters, the managing director of energy at British Gas, admitted that there was further work to do on that.
Later this week, Energy Secretary Ed Davey is expected to set out further details of the annual competition test for the energy market. Later this week, the Energy Secretary, Ed Davey, is expected to set out further details of the annual competition test for the energy market.
The review will be carried out by Ofgem in conjunction with the Office of Fair Trading (OFT) and the new Competition and Markets Authority (CMA).The review will be carried out by Ofgem in conjunction with the Office of Fair Trading (OFT) and the new Competition and Markets Authority (CMA).
The government has also said it will look at the contribution made to energy bills by the green levies, although these make up a relatively small part of overall costs.The government has also said it will look at the contribution made to energy bills by the green levies, although these make up a relatively small part of overall costs.
Labour said it would freeze energy bills for a period of 20 months, if it wins the next election. Labour said it would freeze energy bills for a period of 20 months, if it won the next election.
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