Utility bill increases here to stay, says National Audit Office

The National Audit Office (NAO) has warned consumers that energy and water bill increases are expected to last much longer than expected, adding that prices could continue to outstrip inflation until at least 2030.

The watchdog made the predictions after it said that £310 billion was needed for infrastructure investment in alignment with the government’s national infrastructure plan. It expects two-thirds of this to be paid by utility companies, which will in turn be passed onto consumers.

It also said that 15% of annual household spending was spent on energy and water bills in 2011 by those on the lowest incomes, adding that in 2013, this is expected to rise by £221 in real terms.

The public auditor added that government and regulators were not aware of the potential impact that infrastructure development could have on utility bills.

Amyas Morse, head of the NAO, said, “Government and regulators do not know the overall impact of planned infrastructure on future consumer utility bills, or whether households, especially those on low incomes, will be able to afford to pay them. It seems critical to know ‘how much is too much’, based on reliable information.”

The NAO’s figures come after EDF said on Tuesday that it would be increasing its energy bills by 3.9%, the fifth of the big six energy companies to announce price rises.

The firm warned, however, that unless the government was willing to take environmental taxes off energy companies and transfer them into general taxation, it would increase prices even further.

Battle lines were drawn between MPs and energy companies after Labour leader Ed Miliband announced his intention to freeze energy bills for 20 months in September, if elected in 2015.

Whilst the Labour party is promising this hard line approach to energy prices, the government is encouraging consumers to switch energy suppliers, saying that competition is the only way to bring bills down.

Further reading:

EDF hikes prices by 3.9% and vows to go higher if green levies review falls short

Ed Davey: energy firms should not squeeze customers for higher returns

Good Energy customer on BBC Question Time: ‘my energy bills have never been cheaper’

Ed Davey says energy companies must put customers in control