The government is under mounting pressure to take strong action on rising energy bills after one of the “big six” suppliers imposed its second price hike this year on 1.5 million customers.
The consumer group Which? urged Theresa May to step in if energy groups, which have made a series of tariff increases in 2017, do not help households circumvent the steepest increases.
EDF announced on Wednesday that customers on its dual fuel standard tariff – for accounts taking both electricity and gas – would pay 7.2% or £78 more a year from June. It follows an increase of 1.2% in March and will bring the average annual household bill under EDF to £1,160.
The move by the energy group, which is 85% French state owned, adds to the pressure on the prime minister to take action after she warned in March that the market was “manifestly not working for all consumers”.
Alex Neill, director of home products and services at Which?, said: “Millions are continuing to suffer due to a lack of competition in the energy market. If energy companies fail to properly engage with their customers to help them find better deals, then the government and the regulator must step in.”
A government spokesman said: “It’s another sign the market isn’t working, and we will shortly set out proposals to help energy consumers as part of the government’s Plan for Britain.” The government’s plans are expected to be published later this month.
EDF blamed the increase on rising wholesale energy costs and government policies that have to be paid for by consumer bills, which include schemes to alleviate fuel poverty and support low carbon power.
Of the big six energy companies – EDF, British Gas, E.ON, npower, ScottishPower and SSE – five have raised their prices in recent months, with only British Gas promising to freeze them until August.
The increases have fuelled calls for a price cap to help struggling bill payers, which has prompted warnings from energy bosses that such a move would hurt competition and consumers. The prime minister recently put suppliers on notice when she said she was planning to take action, though what form that will take is not yet clear.
“Energy is not a luxury,” she told the Conservative spring conference in March. “It is a necessity of life. But it is clear to me – and to anyone who looks at it – that the market is not working as it should.”
Vincent de Rivaz, EDF’s chief executive, said: “I know that price rises are never welcome, but the industry is facing significant cost increases.”
On the prospect of imminent government intervention, he added: “We accept that the government, regulators and consumer groups have concerns about the way markets work for customers, particularly the energy market.”
Last month De Rivaz told an industry conference that he understood why May was considering stepping in. He said: “Don’t let the industry off the hook when it comes to delivering the long-term objective of a better market for all customers.”
Price comparison sites showed that EDF’s standard tariff was now more than £300 higher than the cheapest deal on the market, and had become one of the more expensive standard tariffs on offer. Customers on cheaper fixed deals are often stung when those contracts come to an end, because they default on to more expensive standard tariffs.
Mark Todd, co-founder of the switching site energyhelpline, said: “This second price rise from EDF is a total shock. If you are impacted you must switch to avoid this price rise.”
However, figures released on Wednesday showed the number of people switching to different suppliers is increasing only slowly, with 536,658 customers changing supplier in March compared with 420,014 a year earlier.
MPs said EDF’s move showed why the government needed to intervene. “The energy market is manifestly not working and the government needs to step in to protect the vast majority of consumers who find themselves on these standard tariffs,” said Conservative MP John Penrose, who has been lobbying for a relative price cap, whereby the most expensive deals are capped in relation to the cheapest ones.
EDF claimed it was softening the impact on customers by deferring the rise until the summer, when people use less energy.
The company also said wholesale prices were a third higher than a year ago. But this drew a sharp response from the industry watchdog, Ofgem, which said it had not seen a dramatic rise in wholesale prices since EDF’s last increase.
Dermot Nolan, the regulator’s chief executive, said: “Ofgem and the government are working on a raft of reforms to ensure fairer treatment for consumers and to make the market smarter and more competitive. Today’s announcement is further evidence of the need for change.”
Nolan told MPs in February that Ofgem had the power to impose a price cap on tariffs but only if directed to do so by the government.
Many analysts believe some sort of regulatory intervention by May’s government is now highly likely, with experts at Barclays saying it was “almost inevitable”. The main impact of a price cap would be to significantly dent the profit margin that suppliers make on each customer.
Last year the competition watchdog ended a lengthy inquiry into the industry by pulling back from plans for a temporary cap on bills, opting instead for measures to help customers switch to cheaper deals.