More than ten million British households were dealt a fresh blow to their finances yesterday as E.ON and Scottish and Southern Energy (SSE) became the latest power companies to raise gas and electricity bills by as much as 29 per cent.

E.ON, which has 5.5 million customers in the UK, announced that it would increase prices by 16 per cent for electricity and 26 per cent for gas. It blamed the soaring cost of wholesale energy, which it said had risen by 51 per cent since February. Hours later SSE, the country’s second-biggest energy supplier, with 8.5 million customers, said that it was increasing electricity and gas prices by 19 per cent and 29 per cent respectively.

Although some fixed-tariff customers will not be affected, the increases will nudge the number of households living in fuel poverty above the five million mark for the first time in more than a decade.

Gordon Brown has promised to deliver an early package of help. The Prime Minister emphasised that he was focused on finding ways to help those hit by soaring energy and food bills and the housing slump.

Among the plans being discussed are fuel vouchers of between £50 and £100 for the poorest families that are eligible for child tax credits. Ministers are also thought to be arranging an accelerated home-insulation plan by requiring energy companies to spend £2.75 billion helping low-income families to make their homes more energy efficient.

The Tories announced a plan yesterday that they claimed could help the poorest households to reduce their energy bills by £100 a year. The party wants to reform post office accounts – held by more than four million families – so that they can be used to pay utility bills using the equivalent of a direct debit. Customers who pay by direct debit are offered lower tariffs. George Osborne, the Shadow Chancellor, said that the plan had the backing of EDF, the French power giant, United Utilities and Water UK, the body that represents water companies.

Alistair Phillips-Davies, the energy supply director of SSE, cast the increases as a response to fundamental shifts in the world’s energy market. “Global demand for all types of energy has risen steeply and supplies of finite resources like oil and gas are under intense pressure,” he said. “The world is experiencing an energy shock of a kind not seen since the early 1970s, but which is likely to have more profound and lasting consequences.”

Adam Scorer, of energywatch, the consumer group, said that the rises pointed to a calamitous failure of competition in Britain’s energy market. “We have seen four price rises in four weeks,” he said. “Energy companies are able to behave like this because the level of competition has been allowed to atrophy.” Graham Bartlett, managing director of retail business for E.ON, said: “I’m very aware of the effect of today’s announcement. This was not an easy decision to make and we’ve tried to keep these increases as low as possible while protecting as many of our customers as we can.” E.ON said that it was investing billions in new energy projects as well as £200 million in a gas storage scheme in Cheshire that it said would enable the storage of gas in the summer, when prices were low, for use in winter, thus reducing price volatility.

The latest rises follow similar recent moves by EDF and British Gas. ScottishPower and npower are expected to follow suit within weeks.

Wholesale prices surge

- Wholesale energy prices surged as traders took fright at supply bottlenecks and geopolitical tensions. The cost of a barrel of crude oil rose 5 per cent, pushing benchmark prices in London and New York above $121 and UK gas prices hit records for the coming winter. The cost of wholesale gas for the first quarter of 2009 reached a new high of 112p a therm because the market, once expecting winter oversupply, now fears shortages in Britain.

Money Central: 10 tips to beat the energy price hike

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