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Energy consumers get the cold shoulder

Brrrrrrrrr!

Our high-ceilinged Victorian house has ill-fitting doors, rattling windows, draughty chimneys and no cavity walls to fill. So there's a limit to what we've been able to do to save energy (beyond a foot of insulation in the loft) during a six-year period when average power bills have risen from £500 to £1300 a year, while our incomes have stood still. But, in addition to woolly jumpers, I've found a very effective way of staying warm this week: anger.

Scottish Gas prices rise by 6% tomorrow and SSE, which has just announced a 38.3% rise in half-year profits, added 9% to power bills last month. Each time the oligopoly that we laughingly call Britain's "energy market" jacks up its prices, the "big six" parrot the same pretext: "Sorry, my dears. We've no choice. We're just passing on rises in wholesale prices."

It's not that simple. Though gas bills show a wholesale price, utilities – even those who are also energy producers – are constantly buying gas as long-term supply contracts or on the wholesale market. The gas we buy may have been purchased long before recent rises in wholesale prices, so a 20% price hike doesn't necessarily reflect a 20% rise in costs to them. And thanks to the opacity of the market, they can pick which prices to quote to justify charging you more.

It gets worse. On Monday whistleblower Seth Freedman alleged that "it seems like manipulation is rife in the gas market". His narrative, involving traders ganging up to shift a key price used to set long-term contracts, had a familiar ring: it's just like the Libor scandal. If traders can buy gas fractionally below or sell it just above the true market value, there are fortunes to be made. Energy customers pay the difference. A second whistleblower noticed odd price movements in gas prices on up to a dozen occasions. The big six all deny price fixing and boast of safeguards to prevent collusion but this story is not likely to go away. If it turns out that companies can depress gas prices, then allow them to bounce back up, it provides a ready-made excuse for charging customers more.

Unaffordable energy prices cost lives. In the UK the scandal persists of around 20,000 "excess winter deaths" in an average winter. That's how many more over-65s die in winter, compared with autumn and spring. Even allowing for flu outbreaks, that's too many of our OAPs not keeping warm enough. And it's worse in Scotland with our harsher climate, hard-to-heat homes and half a million households (21%) living beyond the gas mains. Every 1% rise is Scottish fuel bills drives nearly 10,000 more households into fuel poverty.

Matters are made worse by Ofgem, surely Britain's most supine regulator. In March 2011 it finally produced a tough-talking report admitting that competition is being stifled by a cocktail of complex and confusing tariffs (1756 of them according to Which?), lousy customer service, a lack of transparency and the stranglehold of the big six. What happened? Next to nothing. This week Ofgem was already admitting it has "limited powers" to act on wholesale prices. So limited in fact the regulator has to guess how much companies have actually paid for their gas and electricity!

David Cameron talks tough about forcing companies to put customers on the cheapest tariff but knows that in a deregulated market he has little power to act. The promise to legislate evaporated within 24 hours.

The latest scandal ought to be the last straw. Renationalisation just isn't going to happen in the current climate but the Government could move to force companies to separate wholesale and retail activities or at least sell some energy into a pool (as in Germany), to allow new entrants a fair crack at the market.

Energy companies need profits to invest and pay dividends but consumers should be able to feel they are getting a fair deal. Meanwhile, we'll carry on turning off radiators in rooms we don't use much, dreaming of a snug eco-friendly bungalow, piling on the sweaters and nursing our wrath to keep it warm.

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