The wholesale markets for electricity and gas have experienced an unprecedented level of volatility in recent years. From February 2007 (when we had announced our intention to reduce domestic retail prices) to July 2008, wholesale costs increased by more than 200%. Whilst they have since fallen, they remain around 60% higher than two years ago.

Whilst we’ve had to implement some price increases to our customers, these increases have only been a fraction of the movements seen in the wholesale markets. We try to protect our customers from increases in costs. The instability and volatility of the wholesale markets, combined with how we purchase energy – in advance, primarily to protect our customers from this volatility in their prices – means that when costs fall it takes a period of time before we are able to pass on these benefits to our customers.

This does not change our commitment to our customers – to offer competitively priced energy and offer the best level of service we possibly can.

Decrease for prepayment customers

We matched prepayment electricity prices to standard prices back in 2005 and prepayment gas prices to standard prices in August 2008, although these are more expensive for us to support.. We were one of the first energy suppliers to do this.

We’ve also launched an extension to our new WarmAssist tariff for more vulnerable customers, to enable those on prepayment meters to benefit. Customers who are eligible and have prepayment meters are now also able to access this tariff.

We began a project (the ‘Token to Key project’) in early 2006 to replace our token meters with key meters. For customers, this meant specific non-disconnect times, more accurate accounts, and a simpler meter to manage. This pre-empted a requirement by Ofgem for suppliers to replace token meters with key meters across the country. We’ve invested £21m in this crucial project which is expected to be completed during the first half of 2009.

Electricity customers with no mains gas

Ofgem highlighted that customers off the gas grid couldn’t as easily benefit from competition – we responded before Christmas by committing to a reduction in our electricity prices for residential customers in our areas off the gas grid. These customers will see a reduction in their annual bill of £14 in 2009.

Disconnection

We take our obligation regarding disconnections very seriously. As a result of identifying a small number of vulnerable customers who were disconnected after falling into debt, we ceased all residential disconnections on 11 July 2008. We’ve ensured that all affected customers are back on supply and we have completed a full investigation into this issue which highlighted some weaknesses in our processes. We’ve therefore started a complete review of our processes including how we communicate and engage with our customers during debt management. No further residential disconnections will be carried out until our investigation and review has been completed and we are confident our procedures are robust.