Guardian News and Media/London
Energy prices are rising at up to eight times the rate of earnings, according to research that will put suppliers under further pressure to justify their recent price increases.
As the soaring price of energy starts a national debate on how to keep gas and electricity suppliers in check, analysis from Citizens Advice projects that by next month, the big six suppliers will have increased their prices by 36% since October 2010.
During the same period, average earnings will have risen by 4.4%.
Earnings growth has been sluggish in recent years, potentially skewing the comparison, but the research also shows that energy companies’ prices have risen at three times the rate of inflation, which has been 10.2% over the past three years.
Citizens Advice says it has grave concerns about the impact that energy price rises are having on people’s ability to maintain a decent standard of living. It says it “often sees” clients in financial despair and warns that a growing number of parents are facing tough choices between putting the heating on, clothing their children and feeding the family.
The national charity says it has seen a surge in people seeking advice about energy issues since the first of the current round of price rises was announced in October. Calls to its consumer service about energy issues have doubled since the first increase was announced, and more than 83,000 people have sought help from its website, a 44% increase on the 33 days prior to the announcement.
There are fears that many people will rack up debts to pay for their winter energy bills.
A study of clients who visited a Citizens Advice bureau between January and March this year found that 28% of those seeking help with an energy problem also had debt difficulties.
There are concerns that this proportion could increase as a result of the recent price rises. Figures from the industry regulator, Ofgem, released last week, show that 1.4mn electricity accounts and 1.2mn gas accounts are in arrears even before winter temperatures set in.
“Enormous escalations in energy prices are creating a desperate situation in many households,” said Gillian Guy, chief executive of Citizens Advice. “People find they do not have enough money to pay for essentials as increases in daily costs are outstripping low rises in earnings. As we head into winter and the latest price rises begin to kick in, more and more people are likely to reach crisis point as they struggle to heat their homes and feed their families.”
Guy called on the energy companies and the government to look at how they could reduce the pressure that energy bills are putting on people’s finances. “People should not have to get into debt in order to have a warm home,” she said.
“It’s absolutely essential that families on low incomes, and pensioners, get the necessary help to stay warm, so I urge the government not to cut the support that is currently available.”
The issue of rising energy prices has dominated the political agenda this autumn, following Labour leader Ed Miliband’s pledge to freeze prices for 20 months following the next election.
The coalition is examining measures designed to find £1.6bn a year to help cut energy bills.
Last week there were warnings that bills could rise by almost 50% over the next six years.