Energy Prices: Customers 'Not Cash Cows'

The Energy Secretary has warned that customers are not "cash cows" to be squeezed for profits by the shareholders of energy companies.

Liberal Democrat Ed Davey delivered the warning in a speech to Energy UK's annual conference today.

Energy Secretary Ed Davey

He urged the industry to "open up your books" to show how it is trying to keep tariffs low but accused them of behaving like bankers and reaching their "Fred the shred" moment.

His speech came amid warnings that gas prices could soar this winter if the national supply runs short during another cold snap.

Average price rises of 9.1% had been announced by four of the UK's six main energy companies. However, EDF today became the fifth energy firm to announce a price increase significantly unveiling a far lower rise - just 3.9% - than the other companies.

It said it was not passing on the rising cost of the Government's green schemes, which it claims would have added an extra £50 to the average household bill.

The move will put pressure on David Cameron to come good on his pledge to roll back green energy levies - the charges on a customer's bill used to pay for environmentally friendly energy production schemes.

The sixth energy firm, E.ON, is reportedly poised to increase its prices by 6.6%.

Responding to the EDF increase Mr Davey said in a statement: "Any price rise is disappointing but I'm encouraged that EDF have kept their price rise much closer to inflation than some of their competitors.

"The competition we've introduced to the energy market means people have a choice. They can look for the best deal available; including from smaller suppliers, with the confidence that switching will make an immediate difference to their bills and force the Big 6 to compete on price."

In his speech Mr Davey said that power companies have to make profits to invest in infrastructure, secure supplies, and develop more energy efficient technologies.

He warned: "Those profits cannot come at the expense of the elderly, the vulnerable, and the poorest in our society.

"Customers are not just cash cows to be squeezed in the pursuit of a higher return for shareholders.

"Trust between those who supply energy and those who use it is breaking down. It is so difficult for people to work out what exactly they are paying for that they fear the big energy companies are taking them for a ride when bills go up."

He will say that some customers see a reflection of the greed that consumed banks, and this is a "Fred the Shred" moment for the industry, a reference to former RBS boss Fred Goodwin.

He said the Government was looking at how it could reduce the impact of its policies on bills, which would include backing any "necessary" regulations recommended by electricity and gas prices regulator Ofgem.

"But our commitment must be matched by a commitment in industry to open up your books and set out exactly how you are bearing down on your own costs to make bills as low as possible," he added.

Energy UK, he organisers of the conference at which Mr Davey spoke, said: "The energy industry is already working hard to ensure everyone can keep the lights on and stay warm this winter. The best way to do this is for everyone to work together which is why this tit for tat Punch and Judy show of insults is so unproductive.

"The energy industry is vital to the UK. It is a major employer, a serious investor and a significant taxpayer. As analysis form UBS shows about 95 per cent of rising energy costs are out of the hands of the energy companies and can be attributed to government policies and other network, social and environmental costs."

Industry analyst Peter Hughes told Sky News that a "perfect storm" last March of extreme weather and the shutdown of two major pipelines caused prices to double.

He added that could happen again because the Government has refused to support the storage of more gas.

"It foreshadows things to come," he said. "The situation in terms of the risks will only get worse as North Sea production runs down and demand rises."

Sky's Nick Martin, on a gas platform in the North Sea, said: "North Sea gas won't last forever, the harder-to-reach wells cost tens of millions of pounds to drill.

"Somewhere in the middle of this complex equation, the customer still expects value for money."

:: Watch a day of special coverage on energy costs all day on Sky News - on Sky 501, Virgin Media 602, Freesat 202, Freeview 82, Skynews.com and Sky News for iPad.

There will also be a special programme on the energy industry on Jeff Randall Live this evening at 7pm.

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