E.ON U.K. Raises Gas, Power Prices After Costs Surge

By Paul Dobson

Aug. 21 (Bloomberg) -- E.ON AG, Germany's biggest utility, will raise U.K. household prices for natural gas and electricity tomorrow after wholesale costs advanced to a record, boosted by a Norwegian pipeline leak.

E.ON will charge 26 percent more for gas and 16 percent extra for electricity supplies, the company said today in a statement. That will cost the average customer buying both gas and power from the Dusseldorf-based utility an additional 226 pounds ($422) a year.

The move comes after Centrica Plc's British Gas unit, the country's biggest supplier, raised charges on July 30 and Electricite de France SA's U.K. division put up prices five days earlier. The increases may stoke inflation across the U.K. economy, adding to the Bank of England's problems as it seeks to stave off a recession.

``The gas pipeline leak is probably the straw that broke the camel's back and a good excuse to put prices up today, though the hikes were inevitable irrespective of the overnight news,'' BNP Paribas SA economist Alan Clarke said today in a note. The price increase was in line with estimates, he said.

U.K. gas and electricity for the coming winter traded at records today after StatoilHydro ASA said yesterday that the North Sea Kvitebjoern field may not export gas this winter because of a pipe leak. Gas-fired power plants produce more than 40 percent of Britain's electricity, so the gas price influences the power market.

Antitrust Probe

Britain's six biggest energy suppliers are under increasing scrutiny after a panel of lawmakers said the government should consider pursuing an antitrust probe into gas and power markets because of climbing retail prices. All six raised prices in the first half of the year. The industry regulator is conducting its own investigation and will report later this year.

RWE AG's U.K. unit isn't ruling out a price increase, spokeswoman Sunita Patel said today by telephone, adding that the company has ``no immediate plans'' to raise rates. ``We face the same pressures as any other utility company,'' she said.

Scottish Power Ltd., the British division of Iberdrola SA, ``continues to review'' pricing ``against the market we operate in,'' spokesman Paul Ferguson said by telephone.

Laura Young, a spokeswoman for Scottish & Southern Energy Plc, declined to comment. The company's chief executive officer said in July that it's becoming more difficult to resist increasing consumer prices.

`Steady Climb Upwards'

``Today's news of a key gas pipeline being shut and wholesale gas prices increasing as a result does not augur well for consumers,'' said Ann Robinson, director of consumer policy at E.W. Scripps Co.'s Uswitch, a Web site that makes money when consumers use it to change energy supplier. ``All the evidence points towards a slow process and a steady climb upwards for energy bills.''

Good Energy Group Plc, a supplier of renewable electricity in the U.K., said today a price increase is ``imminent'' after first-half net income declined 19 percent.

``We are putting our prices up because the wholesale costs have risen significantly,'' Finance Director Jon Fairchild said in a telephone interview.

E.ON said it will stop charging a premium for U.K. customers on so-called prepayment meters to help shelter poorer consumers from the impact of the price increases. The utility has about 5.5 million customers in the U.K.

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net