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Energy prices rise eight times rate of earnings

17 November 2013

Households have been subjected to price rises from the big six energy firms since October 2010 that are eight times higher than increases in average earnings, reveals Citizens Advice.

New calculations from Citizens Advice find that the big six suppliers have increased their prices by a total of 37% since October 2010.  Average earnings have only risen by 4.4% during the same period.

Energy firms’ prices have gone up three times the rate of inflation, which has risen by 10.2% since October 2010.

The impact energy price rises are having on people’s ability to have a decent standard of living is causing grave concerns for Citizens Advice.  Citizens Advice Bureaux often see clients who are on the brink of financial despair.  Parents often face tough choices between putting the heating on, clothing their children and feeding the family.

The national charity has seen a surge in people seeking help about energy since the start of price rise announcements in October this year.  Calls to the Citizens Advice consumer service about energy issues have doubled since the first increased was announced and over 83,000 people have sought online help, a 44% increase on the 33 days prior to the announcement.

Citizens Advice fears people are racking up debts to pay for their winter energy bills as new analysis finds 28% of people who seek help with an energy problem from a CAB also have a debt issue.  This is based on a study of clients who came to a Citizens Advice Bureaux during January to March 2013.  Of those clients who got help about energy and debt:

  • half are in debt to their energy supplier
  • 18% had credit or store card debts
  • 1 in 5 had an unsecured personal loan.

Figures from Ofgem, released this week, reveal the extent of people being unable to pay their energy bill.  While the number of households who have had their energy supply cut off is down to 557, 5% of all energy accounts are in debt (1,358,764 electricity accounts and 1,194,853 gas accounts).

Citizens Advice Chief Executive Gillian Guy said:

“Enormous escalations in energy prices are creating a desperate situation in many households.  People find they do not have enough money coming in to pay for everyday 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.

“People should not have to get into debt in order to have a warm home.  Energy companies and the Government need to look at how they can reduce the pressure energy bills are putting on people’s finances.

“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.

“Levies are adding an unfair financial burden to poorer households.  Paying for these costs through taxation would be a much fairer approach and would avoid low income households funding the very support that is supposed to help them.”

Notes to editors

  1. Citizens Advice used the same method to calculate the cumulative rate of inflation, energy price rise and average earnings as follows:
  2. Citizens Advice calculated the cumulative effect of each of the big six energy suppliers’ price rises since October 2010 by analysing every announced price change for gas and electricity tariffs from each the firms and establishing the average for each.  The figure takes into account all of the recent price announcements including the expected increase of 6.6% by E.ON which is yet to be confirmed.
  3. The CPI one month rate was used to calculate the compound percentage increase from October 2010.
  4. The increase in average earnings was calculated by using ONS data on average weekly earnings.  October 2010 was the baseline and Citizens Advice assessed how earnings had changed since then.
  5. Citizens Advice tracked energy price rises since October 2010 as this is when energy companies started to consistently increase prices across all tariffs.
  6. The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
  7. The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
  8. To find your local bureau in England and Wales, visit www.citizensadvice.org.uk. You can also get advice online at www.adviceguide.org.uk
  9. You can get consumer advice from the Citizens Advice consumer service on 08454 04 05 06 or 08454 04 05 05 for Welsh language speakers
  10. Citizens Advice Bureaux in England and Wales advised 2.1 million clients on 6.6 million problems from April 2012 to March 2013. For full 2012/2013 service statistics see our quarterly publication Advice trends
  11. Citizens Advice service staff are supported by more than 22,000 trained volunteers, working at over 3,000 service outlets across England and Wales.