Fuel bill too high? It’s your draughty old house’s fault says Npower

Npower chief executive Paul Massara said the actual unit prices of gas and electricity in the UK are among the lowest in Europe - but bills are high “because British houses waste so much energy”.

In the supplier’s second “Energy Explained” report, Mr Massara said: “If we can increase the efficiency of the UK’s old and draughty housing, we can ensure that annual energy bills are some of the lowest too.”

He warned that the cost of upgrading the nation’s energy infrastructure is set to increase bills unless households can take action through efficiency measures.

And the report claims that at least 16 different policy and regulatory costs will have a direct impact on energy bills by 2020.

Npower announced a 10% average bill increase in the latest round of price rises late last year, affecting about 3.1 million customers, but has said that it will reduce bills as a result of a shake-up of Government green levies

Mr Massara said: “At times during the debate on energy, facts have been in short supply, but we urgently need to dispel some myths to restore trust in the energy industry.

“In total there are over 140 companies involved in the production, generation, trading, delivery and supply of energy in the UK, all of whom influence the price we pay as consumers for the energy we all use.

“Suppliers control less than 20% of a bill and I want to shine a light on all the different aspects of energy, particularly to reassure my customers that there is no hidden profit. We made a 3.2% margin in our retail business in the first nine months of 2013.

“Over the same period our power stations were struggling to recoup the hundreds of millions of pounds in investment required to build them, and made a loss of £59 million.

“In 2013 we traded energy with around 80 other companies through open market exchanges. The actual unit price of energy in the UK is one of the lowest in Europe but bills are high because British houses waste so much energy.

“If we can increase the efficiency of the UK’s old and draughty housing, we can ensure that annual energy bills are some of the lowest too.”

In its first report last year, Npower predicted average household bills would rise by £240 to £1,487 by 2020, primarily because of “unprecedented investment in new infrastructure and the cost of improving energy efficiency in people’s homes”.

It also claims that network charges will rise from 2015 to 2020.

But regulator Ofgem disputed this, saying that it sets the network charges and they are set to remain flat over that time.

An Ofgem spokesman said: “We welcome Npower’s effort to inform the energy debate, however their data on network costs is incorrect and misleading. We offered to help Npower improve the accuracy of their numbers for network charges and it is disappointing that they did not engage fully with us until after the document had been circulated.

“Ofgem directly regulates the money that network companies can earn through charges. Given this level of certainty we can see that after 2014 network costs per household are expected to remain broadly flat in real terms. It is unclear how Npower can state with any authority otherwise.”

A Department of Energy and Climate Change spokeswoman said: “The Government has acted to reduce the cost of social and environmental programmes on bills, which should save bill payers around £50. We expect energy companies to be clear with their customers how and when they will be passing these savings on.

“We have introduced more competition and transparency in the market to keep prices down and force energy companies to be honest about the profits they are making. Ofgem will be presenting its findings on the state of the energy market in March and we will be consulting on new criminal sanctions to strengthen the powers of the regulator in cases of energy market manipulation.”

Decc added: “Npower’s analysis is incorrect on so many levels.

“Government estimates that the impact of our social and environmental programmes will in fact lower energy bills compared to what they would be in the absence of our policies, by as much as £166 in 2020.

“A number of the policies listed by Npower don’t have any impact on household energy bills, including the Renewable Heat Incentive, Climate Change Levy and the Carbon Reduction Commitment.”

Mr Massara criticised the Government’s plans to reform green levies. He told BBC Radio 4’s Today programme: “They made some technical changes on what carbon we actually have to deliver. That reduced the bills by about £53.

“We don’t want them to scrap it because actually we think that insulating old people’s homes and insulating homes which are leaky is the right thing to do.

“What they should have done is taken all of it into taxation because actually it is unfair that everybody gets hit by the same way in the terms of insulating people’s homes.”

Mr Massara also criticised Labour’s planned freeze on energy prices claiming it was already hampering investment.

“I think it is already having a dramatic effect already. What it’s doing is freezing investment.”

Mr Massara said the threshold for investment had gone up because of the increased political risk.

He added: “We are seeing a dramatic cooling of investment into the UK because of political uncertainty.”

Mark Todd, co-founder of switching website energyhelpline.com, said: “The reason why UK energy bills are high is both that the housing stock is not energy efficient but also that suppliers have kept whacking up prices year after year.

“Suppliers have raised prices by 140% in the last nine years while users have cut usage. Typical gas usage is down 34% and electricity consumption by 3% and this is in part because many customers can no longer afford to heat their homes.

“The biggest reason for customers cutting usage is unaffordability so without doubt UK homes are now colder than they were in the past. At energyhelpline we support Government action to make homes more energy efficient but we also support action to make the market more competitive and make the suppliers work harder too.

“It’s crunch time for the energy market and suppliers can’t just blame the houses.”