About 2.5 million E.ON customers will pay an extra £97 a year on energy bills in what consumer groups have branded a “monstrous” and “crippling” blow for householders.

The company’s 8.8% price rise for customers on a dual-fuel standard tariff from the end of next month is the second highest increase among several announced recently by rivals, including a 9.8% rise by npower, 7.8% by Scottish Power and 1.2% by EDF.

The E.ON move prompted the government to renew warnings that it will act if the energy market is shown to be working against consumers. “Wherever markets are not working for consumers, this government is prepared to act,” said a spokesman for the Department for Business, Energy and Industrial Strategy. “We expect energy companies to treat their customers fairly and continue to be concerned by these price rises which will hit millions of people already paying more than they need to.”

British Gas has pledged to freeze prices until August, while SSE has promised to hold prices “until at least April”.

From 26 April, E.ON’s standard electricity prices go up by 13.8% on average, and standard gas prices rise by 3.8%, affecting more than half of the company’s 4 million customers if they take no action. The increases will take the average dual-fuel bill up to £1,144, compared with about £900 for the cheapest deals on the market.

Unlike most of its competitors, which had cited rising wholesale prices for their increases, E.ON said it had seen a drop in wholesale costs. Instead it blamed the increase on government schemes such as renewable energy subsidies, which are levied on household energy bills. The German energy firm said the cost of various social and environmental programmes had risen by about 36% on the year before.

The latest increase comes despite the energy regulator recently saying it saw no reason for the big six to raise prices despite upward price pressures, because of the way they hedge when buying power. Ofgem is due to publish an update later this week on an index of costs facing suppliers; in January that index showed wholesale energy prices were rising.



An Ofgem spokesman said: “In the past few weeks, suppliers have responded to increasing cost pressures by announcing price freezes as well as price increases of different levels. This shows that competition is beginning to bite, with some suppliers competing more effectively than others to keep their prices and costs down.”

E.ON’s move is also likely to lead to renewed calls for the government to step in with a price cap, a step that Ofgem recently told MPs it has the power to do, but only if ministers instruct it to.

Consumer groups and switching sites said the E.ON price rise would add pressure on bill payers, and urged them to look for better deals.



Emma Bush, an energy expert at uSwitch.com, called it a “crippling blow” for households, while Alex Neill of consumer organisation Which? said: “E.ON’s customers on standard tariffs will be rightly outraged that their energy bills are set to go up when the regulator suggested that inflation-busting rises are unnecessary.”

One comparison site, energyhelpline.com, called the rise “monstrous”. The site’s founder said he had counted 25 tariffs across 10 suppliers that would finish at the end of March, pushing up bills for customers on those deals. MoneySuperMarket said it expected SSE to follow suit soon.

The big six, which some experts have said are on the verge of becoming the “big eight” because of so-called challenger companies First Utility and Ovo Energy, are not alone in increasing prices. The Co-Op’s energy arm has raised prices twice this winter, most recently by 5%, and First Utility is pushing up dual tariffs by an average of 9.7%.

E.ON defended the rise as the company’s first in more than two years, and argued that it was due to factors beyond its control.

Tony Cocker, the company’s chief executive, said: “It is an announcement we never want to make, but is due in large part to the fact that many of the costs we don’t directly control, such as policies including EMR [energy market reform], RO [the renewables obligation] and the energy company obligation [ECO], which are paid for via people’s energy bills, are increasing.

“We have been able to partially offset some of these rises through our wholesale hedging policy and other means, but we do have to make an increase.”

A spokeswoman for SSE said the company had “committed to freezing its standard household energy prices this winter, capping them at their current level until at least April 2017”.