By Matthew Legg, Business Editor

Last updated 22:46, Friday, 05 September 2008

An independent gas and electricity watchdog has called recent price rises “calamitous” as energy bills continue to escalate.

Fuel for thought: The average UK household gas bill has risen by 160 per cent since 2003

The average UK household gas bill has risen by 160 per cent since 2003. Electricity bills over the same period have risen by 96 per cent.

The news last Thursday that Eon is increasing gas bills by more than a quarter and electricity bills by 16 per cent raises the stakes for Government and Ofgem plans to fight fuel poverty and introduce market reforms, due to be announced in the autumn.

Energywatch was set up to protect and promote the interests of all gas and electricity consumers, and works closely with the regulator, Ofgem, to monitor energy companies.

Adam Scorer, the watchdog’s campaigns director, said: “The brakes have failed on the energy market. The results are calamitous.

“Protection for the poorest, effective competition and rational wholesale markets should be limiting the impact on consumers. Clearly they are doing no such thing.”

Eon is the third of the big six companies to raise prices this summer. The average annual Eon bill for gas has increased by £166 and electricity £68, while its dual fuel charge has gone up by £223. This will push the number of households in fuel poverty to over 5 million. Mr Scorer said: “In the long term, Government needs to drive a super energy efficiency campaign for new and existing properties. The energy market has hard-wired fuel poverty into the system; Government could reverse that by building energy efficiency into the fabric of all our homes.”

Energywatch says that with household budgets being stretched tighter the need for action has never been greater. It is waiting for announcements from the Government and Ofgem in the next month to see whether there is a coherent plan to tackle the market’s failings. It is hoping the announcements will implement the July recommendations from the Commons Business and Enterprise select committee.

Mr Scorer added: “Alistair Darling and John Hutton have both expressed concerns to Ofgem about the relation between profits and prices and the effectiveness of competition in the energy market. Ofgem’s market probe is due to report next month. Unless that leads to action to promote more competition, new entrants, increased trading and fairer price formation the consumer will fail to feel the benefits of a properly competitive market.

“It’s not just consumers who are confused about what drives price rises. The wholesale price of oil and gas has fallen back in recent weeks but companies still feel the need to raise prices by staggering amounts. The hard fact is that prices are still set in relation to an irrational and toxic link to the price of oil.”

The fuel voucher scheme for families receiving child benefit, Energywatch says, is a promising sign that support is being extended to non-elderly fuel poor.

Eon has also put a smaller price rise on its prepayment meter customers but they will still pay, on average, more than £100 more for the same amount of energy as an online customer.