Energy price hikes unwelcome but inevitable warns Midlands academic

PRICE rises by energy companies are inevitable if unwelcome, a Midlands academic has said.

Professor David Elmes, who runs Warwick Business School’s Global Energy MBA was responding the announcement by British Gas that it is to raise prices by more than 9%.

He said the reality was that costs were rising worldwide and the UK had to invest to ensure it had secure and sustainable energy in the future.  

Professor Elmes, who has worked in the energy industry for 20 years, said: “This is not good news for customers, but reflects the reality that energy prices around the world are rising and it should be remembered that the UK is still below average for retail gas and electricity prices in Europe.
 
“When you look at today’s energy market, there are companies who generate power, those who distribute it to homes and offices and the energy retailers who we pay our bills to.  What we pay our energy retailer includes the costs for all stages as well as the cost of various Government programmes to encourage improved energy efficiency and growth in sources of renewable energy.”

He said energy companies were making about 5% profits at the moment and consumers were faced with having to pay around £100 per year through their bills to support programmes for energy efficiency and renewables.
 
“The energy companies make relatively less of their profits from being an energy retailer.  There are many retailers other than the ‘big six’ but they remain fairly small otherwise they have to add the costs that the Government imposes for investment in renewable energy sources, energy efficiency programmes and help with fuel poverty,” he added.
 
Prof Elmes said the energy generation and distribution parts of a business were far more profitable but that’s where a lot of investment was needed in order to develop new sources of power and improve the way power is distributed around the country.  

“Without that investment, there’s the rising concern about keeping the lights on.  There are more generating companies than the ‘big six’ and what profits they make is heavily influenced by the way the Government runs the market for the power they produce – and we have a bill for Electricity Market Reform working its way through parliament at the moment,” he said.
 
“So while it’s easy to blame the power companies for price increases, the reality is that costs are rising worldwide and the UK is investing to ensure we have secure and sustainable energy in the future.  Keeping energy as affordable as possible needs greater transparency from companies and the right form of collaboration between them and the Government to make the investments needed while ensuring continued supplies.”