Energy bill price hikes not just a problem for consumers

Energy firm SSE has announced that electricity and gas prices will rise by an average of 9% from October 15. Photo: PA Wire

Millions of SSE customers may tonight be pretty peeved about another increase of nine percent on their energy bills coming in October.

But with industry sources telling me others are likely to follow suit in the next few weeks, it threatens to be more than just a problem for those consumers.

Millions of others may see their bills go up as well.

[Yet it is potentially a real headache for the Governor of the Bank of England too. It is his job to keep inflation down at two percent.

After spikes last year of over five percent it has (apart from a recent small hiccup) been drifting back down towards its target.

And the week before last, Sir Mervyn King sounded pretty confident he would achieve that.

But look back at why the index was so high last autumn, and the rise in energy bills was the biggest single contributor to high rates.

Time and again we heard the Governor say that energy costs were a big part of the problem.

Another series of increases in gas and electricity bills could quickly shove the Bank off course.

With petrol prices edging up again, oil prices high and food prices threatened too by a record drought in the United States, his targets may well have to be abandoned, again.

Philip Shaw, the chief economist from Investec told me this afternoon they may well have to revise their forecasts, and many of the factors that could drive it upwards are out of the authorities' control.

But it is also a political headache. The coalition has made a big play of trying to forcing energy companies to keep bills down.

Nick Clegg has boasted of "keeping them on their toes", talking of "landmark deals" with the industry that would keep bills down. The threat of widespread price increases risks making their efforts look futile.

It's trickier still because SSE has blamed part of their price rise on the increase in costs imposed on them by the Government.

And in the big picture, if inflation takes off again, prospects of 'recovery' are pushed even further into the future. And senior figures in the Government are all too aware of the dangers of voters feeling skint.

Unlike energy price rises last year which had been widely predicted, this afternoon's price hike and its scale has come as a nasty surprise. And not just for those who'll have bigger bills landing on the doormat.

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