Energy chiefs will be asked to defend expected future rises in fuel bills when they appear before MPs today. Domestic suppliers are under pressure to justify pricing expectations after it was discovered household energy bills could rise by up to 40 percent this winter.

Industry experts have suggested that households could pay up to £400 more a year for gas and electricity. Suppliers are said to be reacting to the sharp jump in wholesale gas costs, triggered by rising oil prices.

Wholesale gas prices are closely linked to the price of oil, which itself has recently hit just under $140 a barrel.

Industry research has suggested wholesale gas prices have risen by more than 70 percent in 2008. Last month Centrica – who own the UK’s biggest energy provider, British Gas – signalled that gas prices for customers are likely to increase again later this year.

Centrica’s chief executive Same Laidlaw will appear before the Commons Business and Enterprise Select Committee today, along with other senior industry figures.

MPs want to find out what suppliers expect to happen to fuel bills over the winter. They will also press energy chiefs on the extra help being given to low-income and disadvantaged households to help with the impact of rising bills.

Watchdog, Ofgem, who are conducting their own probe in to the market, outlined plans last month to share data about people on low incomes with the energy companies to help people pay their fuel bills. The proposals, which would need to be approved by parliament, are designed to ensure that financial assistance toward fuel payments can be better targeted at the elderly and vulnerable.

The government has estimated that 2.5 million UK households are suffering from fuel poverty – defined as when more than 10 percent of household income is spent on fuel bills – but watchdog Energywatch says that the figure is over four million.

A 40 percent rise in fuel bills would be far higher than expected and would put even more pressure on homeowners already struggling with higher food and fuel costs. However, some analysts believe the increases will be nearer to 25 percent.

It is believed any price announcements will come in August, when energy bills are not at the forefront of people’s minds. It is thought, however, that there is reluctance in the industry to be the first company to reveal a big rise, so they could be unveiled in stages.

Involved in the meeting today are the chief executives of Scottish & Southern Energy, NPower, EDF Energy and E.ON UK. A representative of Scottish Power will also be present.

Alistair Darling and Mervyn King yesterday delivered a bleak assessment of economic prospects for 15 years in what the Bank of England governor said was “the most challenging period” since 1997.

Mr King, during his annual Mansion House speech to City grandees, warned households should prepare for the “average take-home pay [to] stagnate this year”, and said that “the squeeze on real income growth is likely to mean that both house prices and consumer spending weaken together”.

In addition to this, the chancellor conceded his Budget forecasts would not be met, accepting that inflation would be higher than predicted and that no country could escape the effects of higher inflation on real incomes and economic growth.

Both Mr Darling and Mr King stressed the need for wage restraint. The chancellor insisted “inflationary pay settlements would undermine rather than raise people’s living standards” and the Bank governor waned that an economic slowdown “will be necessary to dampen price and wage pressures”.

The Shell tanker driver wage dispute is just one example that some companies and employees will do what is best for them rather than for the wider economy. The government insisted that the drivers 14 percent over two years, pay deal was “particular” to the industry, but Mr King issued a warning that he would not allow higher pay deals to result in ingrained inflation.

In a sign that the Bank of England was now thinking about interest rate rises, the governor said: “There should be no doubt that the Monetary Policy Committee is prepared to take whatever action is needed to return inflation to the 2 per cent target and to keep expectations of inflation in the medium term anchored to the target.”

A much tougher statement of intent than he gave in his letter to the chancellor on Tuesday, the minutes of the MPC meeting, published on Wednesday, revealed that the committee had discussed an immediate rise.

The governor made it clear he was not going to go soft on inflation, quite the opposite from his letter earlier this week. He fought back at critics who have called for the inflation target to be changed to ignore current pressures from abroad. “Target growth, not inflation is the cry,” he said. “I could not disagree more.”

“Without a clear guide to the objective of monetary policy, and a credible commitment to meeting it, any rise in inflation might become a self-fulfilling and generalised increase in prices and wages,” Mr King added.

His main message was that if everyone tightened their belts, accepted “a loss of real purchasing power” and understood the Bank could not side-step tough choices in the coming year, things would look up thereafter.

While the announcement today that the UK Treasury will guarantee all Northern Rock customer deposits has been fairly well received - probably a case of better late than never - it does beg the question, why have the government changed their policy? Are they aware of more bad news in the sector?

Properties bought for cash

As we have mentioned on some of our earlier posts, the main component of any financial market is confidence. As we are seeing now, confidence is easy to smash but not so easy to build back up over a short space of time. The move by the Treasury today, which effectively guarantees that all Northern Rock customer deposits are safe, surprised many in the market due in the main to the historic role of the authorities not to become directly involved in free market business.

Many in the markets are asking why they performed such a major u-turn, after only hours early indicating that they were not prepared to step in above and beyond the current compensation arrangements available. Do they know something that will rock the sector again? Are they so desperate to restore confidence that this is the only action they can take?

We have regularly seen authorities in the US use such a tactic to try and soften the blow of future shocks and disappointments, but this is the first time we would have seen such action in the UK, if this is the case. No matter how hard the government try, they are not able to convince the financial markets that the worst is over. Such major changes in policy can also upset markets, with suspicion and a lack of direction being pushed to the forefront.

While it was announced some time ago that the UK supermarket sector was being investigated by the UK Competition Commission, new details of the investigation have been leaked to the press and they do not make good reading for the sector leaders, Tesco and ASDA.  So what is happening?

It is believed that the Competition Commission have issued what are known as Section 109s to both groups, effectively forcing them to hand over millions of emails and letters relating to their negotiations with suppliers.  It has long been rumoured that the supermarkets have been exerting undue pressure on suppliers, many of whom are desperate to keep their business to stay a float.

Many retailers, not just the supermarkets, often ask suppliers to reduce their prices when the retailer is planning some kind of price promotion of special offers, effectively passing part of the cost on to their suppliers.  A common item such as the UK pint of milk has often been highlighted as an area where supermarkets have exerted undue pressure, with the cost of a pint actually going down in real terms for many years.  While the suppliers suffer from reduced payments, many supermarkets subtly use milk prices to tempt in customers, in effect a loss leader for many retailers.

The £120 billion supermarket sector has long be a bone of contention for many with a number of traditional “corner shops” squeezed out of business, unable to compete with the bigger companies.  While the authorities are investigating their relationship with suppliers, they are also looking at the overall power of the bigger supermarket chains and the fact that many are buying land to stop rival companies opening up “on their patch”.

It will be interesting to see if the Commission are brave enough to fight the big chains, who have seen their profiles and presence in and out of town centres, continue to rise.