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Darling Summons Gas Regulator to Explain U.K. Price Increases
Wednesday, January 09, 2008
Chancellor of the Exchequer Alistair Darling, seeking to contain inflation and keep a lid on rising energy costs, called for a meeting with Britain's utility regulator after RWE AG raised power and gas prices.
Darling summoned Alistair Buchanan to explain why energy suppliers are increasing prices, according to a letter released by the Treasury today. Darling wants to know if energy suppliers are unfairly using wholesale market fluctuations as an excuse to raise prices.
"I would find it useful to discuss these matters at a meeting with the chief executive," Darling wrote in the letter, which was sent to the regulator yesterday.
The Treasury is asking the chief executive officer of the Office of Gas & Electricity Markets to provide information on the availability of natural gas supplies for the rest of this year. The Treasury doesn't have the power to intervene in the price rises, an authority granted to the regulator.
RWE's British unit NPower said on Jan. 4 that it would raise bills for natural-gas and electricity customers, reversing price cuts made last year.
Npower, Britain's fourth-biggest energy retailer, raised standard household prices for gas by an average 17 percent and power rates by 13 percent from Jan. 5. The company said it decided to raise prices after crude oil traded at more than $100 a barrel.
Inflation Concern
The government has stressed the need to contain inflation as a global surge in credit costs threatens to derail economic growth. Darling is concerned that higher energy costs will constrain household spending and prevent the central bank from cutting lending rates.
Prime Minister Gordon Brown today said he will keep a lid on pay raises for government workers as part of the same effort to control inflation.
"I'm going to be vigilant about the events around the world," Brown told Sky News. "It's not an easy world at the moment. I want to achieve both for business low interest rates and for homeowners low mortgages."
Britons' inflation expectations rose to the highest in at least eight years in a Bank of England survey last month. That may make it harder for policy makers to lower interest rates again after last month's reduction, the first since 2005.
The central bank is required to keep inflation to 2 percent a year. Prices rose 2.1 percent in November.
Courtesy of Bloomberg
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