Ofgem tells the big six energy suppliers not to raise prices

Utility procurement prices

Ofgem has warned the big six energy companies, EDF Energy, British Gas, SSE, E.On, Scottish Power and Npower, that they shouldn’t raise their prices in the Spring, despite a 15% increase in their costs. It believes that increasing wholesale gas and electricity prices were mainly to blame for driving costs upwards, along with renewable energy subsidies.

At the end of last year, energy companies stated that upward pressure from wholesale costs may be passed on to consumers with tariff price increases. However, they were slow to pass on falling wholesale prices in 2014.

Ofgem recently published its supplier cost index. EDF Energy announced a price rise in December, which will increase customers’ electricity prices by 8.4% and lower gas prices by 5.2% in the Spring. Oil prices, which also set the gas price, dropped from a high of $115 a barrel in 2014 to less than $30 at the beginning of 2016. However, the price has now recovered. Other companies have pledged to freeze prices until the end of the Winter, but some have already hinted that wholesale pressures will lead to imminent price rises. The regulator’s analysis found that electricity wholesale costs accounted for 6% of the increase on the cost index, with gas wholesale costs accounting for 6.6 points. Levies on environmental and social programmes, in particular those supporting renewable energy, accounted for 2.9%. Other costs, such as energy transmission and distribution, were down a little. Despite higher costs to suppliers, they are still around a tenth lower than they were at the start of 2014 due to a 2-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.

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Source: The Guardian