Rising Gas and Electricity Prices

Amidst rising gas and electricity prices the chancellor, Alistair Darling will meet with the chairman of energy regulator Ofgem, Sir John Mogg. Darling will ask whether the recent price rises are justified.

At the moment, Electricity, Gas Companies and Ofgem are saying that the price rises are due to the increased cost of oil, natural gas and other energy prices. They claim with oil reaching $100 a barrel it is inevitable that domestic energy prices rise as well.

Ofgem also say that the UK has one of the most competitive domestic energy markets in the World. However, this will be little comfort for those facing higher energy prices.
Some commentators are accusing Ofgem of regulatory capture. This is when the industry regulator becomes dependent on information from firms and gives price rises which favour the firms. For example, it is argued that the increase in wholesale prices should not increase retail prices so much, at least not in the short run.

Energy Prices in 2008

Homeowners face increases of upto 27% in the coming year.

Consumer watchdog Energywatch has welcomed the intervention

Economic Effects of Rising Prices

Higher energy prices could reduce disposable income and therefore reduce consumer spending. It will also put upward pressure on pay rises. Neither of which will go down well with the MPC. - lower spending and increased inflationary expectations.

Regulators of Privatised industries