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| Big six energy suppliers warned not to raise prices any time soon | Big six energy suppliers warned not to raise prices any time soon |
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| The regulator Ofgem has warned the big six energy companies against raising prices in spring, despite a 15% increase in their costs. | |
| It said rising wholesale gas and electricity prices were largely to blame for driving costs upwards, along with renewable energy subsidies. But its chief executive, Dermot Nolan, said this was not an excuse for tariff hikes. | It said rising wholesale gas and electricity prices were largely to blame for driving costs upwards, along with renewable energy subsidies. But its chief executive, Dermot Nolan, said this was not an excuse for tariff hikes. |
| “At this point in time it is not obvious to us that there should be price rises [to consumers],” Nolan said, adding that energy suppliers would need to justify any rise. | “At this point in time it is not obvious to us that there should be price rises [to consumers],” Nolan said, adding that energy suppliers would need to justify any rise. |
| Energy companies said late last year that upward pressure from wholesale costs might soon be passed on to consumers with tariff price rises. But Nolan pointed to the way big players buy their energy: by acquiring as much as possible two years in advance. | Energy companies said late last year that upward pressure from wholesale costs might soon be passed on to consumers with tariff price rises. But Nolan pointed to the way big players buy their energy: by acquiring as much as possible two years in advance. |
| Energy companies were slow to pass on falling wholesale prices to householders in 2014, he said, and so he would expect the suppliers not to rush into changing prices now that the pressure was in the other direction. | Energy companies were slow to pass on falling wholesale prices to householders in 2014, he said, and so he would expect the suppliers not to rush into changing prices now that the pressure was in the other direction. |
| On Thursday the regulator published its supplier cost index, the first time it has analysed costs facing energy suppliers since 2015. Nolan said it should act as “some check on energy companies’ behaviour on price rises”, in a pointed warning to the big six – EDF Energy, British Gas, SSE, E.On, Scottish Power and Npower. | On Thursday the regulator published its supplier cost index, the first time it has analysed costs facing energy suppliers since 2015. Nolan said it should act as “some check on energy companies’ behaviour on price rises”, in a pointed warning to the big six – EDF Energy, British Gas, SSE, E.On, Scottish Power and Npower. |
| EDF Energy blamed wholesale costs when it announced a price rise in December, which will raise customers’ electricity prices by 8.4% and lower gas prices by 5.2% in the spring. Oil prices, which also set the gas price, fell from a peak of $115 a barrel in 2014 to less than $30 at the beginning of last year. However, the price has now recovered to $54. | EDF Energy blamed wholesale costs when it announced a price rise in December, which will raise customers’ electricity prices by 8.4% and lower gas prices by 5.2% in the spring. Oil prices, which also set the gas price, fell from a peak of $115 a barrel in 2014 to less than $30 at the beginning of last year. However, the price has now recovered to $54. |
| Other companies have pledged to freeze prices until the end of winter but some, such as SSE, have already hinted that wholesale pressures will lead to imminent hikes. Switch sites, which help consumers move to a different energy provider, have said EDF’s move was likely to be the “first rise of many”. | Other companies have pledged to freeze prices until the end of winter but some, such as SSE, have already hinted that wholesale pressures will lead to imminent hikes. Switch sites, which help consumers move to a different energy provider, have said EDF’s move was likely to be the “first rise of many”. |
| However, Ofgem said the hedging by energy suppliers, whereby they buy energy in advance, meant they were likely to have been insulated from recent wholesale price increases. For those companies, the cost of supplying a dual-fuel customer would be “only slightly higher than a year earlier”. | However, Ofgem said the hedging by energy suppliers, whereby they buy energy in advance, meant they were likely to have been insulated from recent wholesale price increases. For those companies, the cost of supplying a dual-fuel customer would be “only slightly higher than a year earlier”. |
| Ofgem analysis found that electricity wholesale costs accounted for six percentage points of the increase on the cost index, with gas wholesale costs accounting for 6.6 points. Levies on environmental and social programmes, in particular to support renewable energy, accounted for 2.9 percentage points. Other costs, such as energy transmission and distribution, were down slightly. | Ofgem analysis found that electricity wholesale costs accounted for six percentage points of the increase on the cost index, with gas wholesale costs accounting for 6.6 points. Levies on environmental and social programmes, in particular to support renewable energy, accounted for 2.9 percentage points. Other costs, such as energy transmission and distribution, were down slightly. |
| Despite the higher costs to suppliers, they are still around a tenth lower than they were at the start of 2014 due to a two-year period of falling costs. The average household dual-fuel energy bill was £1,066 in December 2016 compared with £1,140 in December 2013. | Despite the higher costs to suppliers, they are still around a tenth lower than they were at the start of 2014 due to a two-year period of falling costs. The average household dual-fuel energy bill was £1,066 in December 2016 compared with £1,140 in December 2013. |
| Which? welcomed the new index, which will be updated every quarter. “The new index is a step in the right direction to introduce more transparency and help to understand what factors impact people’s bills. We expect to see Ofgem use this index to monitor suppliers and hold them to account to help protect customers from paying more than they need to for their energy,” said Vickie Sheriff, the consumer group’s director of campaigns and communications. | Which? welcomed the new index, which will be updated every quarter. “The new index is a step in the right direction to introduce more transparency and help to understand what factors impact people’s bills. We expect to see Ofgem use this index to monitor suppliers and hold them to account to help protect customers from paying more than they need to for their energy,” said Vickie Sheriff, the consumer group’s director of campaigns and communications. |