FUEL poverty in Scotland is on the rise and will get much worse following huge rises in the price of gas and electricity, a government minister warned today.
Communities minister Stewart Maxwell said Scots will struggle to cope with a record 35% price rise levied by British Gas parent company Centrica.
The increase comes despite half-year profits of £992 million – 19% down on last year.
Mr Maxwell told the BBC's Good Morning Scotland he would not "condemn" the company for making money.
But he added: "We've got people really struggling because of all the difficulties in the economy and at the same time this will result in even more people being pushed into fuel poverty.
"We already have very high levels of fuel poverty – they're on the increase.
"This will just make things much worse."
British Gas, the UK's biggest domestic energy supplier, has 15.9 million customers.
The 35% gas price rise was announced yesterday alongside a 9% rise in electricity prices.
The group said today that the price increases were necessary to restore "reasonable profitability" to British Gas and invest in additional gas and power assets.
Mr Maxwell said it was "about time" Scotland took control of energy matters, which are currently reserved to Westminster.
Asked if the era of cheap energy is over, he said: "We're very supportive of micro-renewables. We are investing heavily in renewables."
The "fuel poverty" bracket is defined as those who spend more than 10 per cent of their income on energy bills.
Cathy Jamieson, one of the candidates in the running to become new Labour leader, called for tough action against energy companies who increase prices while posting massive profits.
Ms Jamieson said: "Enough is enough. For companies to have six-month operating profits of £1 billion whilst families are facing a 35% price hike is not acceptable.
"An increase on this scale will have an impact on everyone, but particularly pensioners and families on lower incomes, who already have tight household budgets."
She went on: "The energy companies need to be given a choice. Either they stop these price rises now or they should expect that tough action will be taken against them.
"The Chancellor of the Exchequer should make it clear that unless we see these companies show some decency then he should be prepared to introduce a windfall tax and then use that money to reduce people's energy bills."
She also called on the Scottish Government to act "instead of carping from the sidelines".
Ms Jamieson urged Holyrood ministers to back fellow Labour MSP Sarah Boyack's Member's Bill on micro-regeneration and to invest more cash in insulation programmes for poorer households.
The former justice minister said: "We cannot afford for this issue to drift and I hope others in the Labour movement will support my calls for action."
Yesterday's price hike was the second this year from British Gas, which supplies a million Scottish households with gas and 500,000 with electricity. In January, tariffs were raised by an average of 15 per cent. The overall effect will be to take average combined bills to £1,317 – up by more than £400 since the start of the year.
The company said it had faced an 89 per cent increase in the wholesale cost of energy, which had added some £2 billion to its supply costs.
As a result, the firm's domestic wing had just reported a 69 per cent fall in annual profits, down from £533 million to £166 million in the six months to June.
It promised not to increase bills any further this year and said 340,000 customers on an economy tariff rates would not have any increase until next April.
With David Miliband, the Foreign Secretary, yesterday refusing to rule himself out of the running to replace a beleaguered Mr Brown, pressure is mounting on the Prime Minister, who must call a general election by June 2010 at the latest.
Pressure is intensifying on the Prime Minister following the loss of the Glasgow East by-election. British Gas's announcement came as food prices continue to rise, and a report yesterday warned 1.7 million homeowners could face negative equity as house prices fall. The decision to scrap a 2p-per-litre rise in fuel duty has brought no respite.
The UK has had the cheapest gas in Europe since 2000, and the cost of electricity has been below average.
But in 2004, Britain became a net importer of gas – despite the presence of North Sea gas. The opening of pipelines connecting the UK to Europe's gas markets has had the effect of increasing UK prices to the European level. Further problems have been caused by delays in building new storage facilities. The UK can store only 13 days of gas, compared with 99 days in Germany and 122 in France.
Phil Bentley, British Gas's managing director, said: "The company regretted the decision at a time many households were feeling the pinch. "The simple fact is we have entered an era of unprecedented high world energy prices." He said the "only answer" was for customers to become more energy efficient.
Scott Byrom, utilities manager at price comparison site, moneysupermarket.com, said: "Hot on the heels of EDF's price hike last Friday, British Gas bill payers are next to face the misery of price rises. With a summer of price hikes now in full swing, British Gas customers now face a £415 increase from this time last year and will be paying £1,330 on average a year for their fuel bills."
Malcolm Wicks, the UK energy minister, said the government was "deeply concerned" about the impact on hard-pressed families.
Ministers have secured an extra £225 million from energy companies over three years to be targeted at poorer households, while the winter fuel payment will rise this year from £200 to £250 (and from £300 to £400 for over 80s).
It believes the best way to keep prices down is not to regulate tariffs but allow open competition between suppliers.
But opposition parties expressed anger that only long-term solutions – such as encouraging foreign countries to produce more oil, or expanding the exploration opportunities in the North Sea – were on offer from the Prime Minister.
Nick Clegg, the leader of the Liberal Democrats, called it a "devastating price rise", particularly for the elderly and families on low fixed incomes.
There have been demands for a windfall levy on energy companies to ensure record profits from the high price of oil filtered from shareholders to customers.
Mr Clegg said: "Energy companies are benefiting from a
£9 billion windfall yet continue to hike up their prices on the government's watch. This is unacceptable."
Ministers claim there are some 2.5 million families in fuel poverty, though the consumer watchdog Energywatch puts the figure at more than four million.
For every 10 per cent increase in prices, a further 400,000 fall into poverty. British Gas says customers it supplies with both gas and electricity will see their total bill jump 25 per cent.
In Scotland, if all energy firms increase prices along similar lines, the number of households in fuel poverty will increase from 700,000 to 860,000 – almost two in every five homes.
Mike Weir, MP, the SNP's energy spokesman, said: "The UK government must act now to limit these price rises, which come at a time when energy companies are making massive profits.
"It is high time that shareholders in the companies suffered some of the pain that is being inflicted on Scottish families."
British Gas owner fuels anger with shareholder payout day after price hikeThe full article contains 1283 words and appears in The Scotsman newspaper.
