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Will the energy big guns follow Ovo's price rise?

gashob2
Guy Anker
Guy Anker
Deputy Editor & Head of Operations
15 March 2012

Ovo Energy has bucked the trend of falling gas and electricity prices by announcing up to 90,000 of its customers face a hike in their bills. But will the big six follow, which would hit millions of households?

It may be a minnow in the energy world, but Ovo's move is significant because it blames rising wholesale costs — the price all firms pay for their energy.

Were the market giants to follow, it would make today's trickle of bad news seem like a gushing waterfall for UK consumers.

Energy commentators say this is a possibility — though there is only an outside chance of this happening, they add.

Scottish & Southern Energy (SSE) has already confirmed it will honour its commitment not to raise prices until at least October.

Mark Todd, from comparison site Energyhelpline.com, says: "It looks like prices are now unlikely to go down any further. If wholesale prices keep rising, there is a risk the big six will start to hike prices again.

"But the chance of that is low. We need a further few months of wholesale rises before that becomes a realistic option."

'Don't worry'

Tom Lyon, from price comparison site uSwitch.com, agrees: "Smaller suppliers are more nimble in reflecting wholesale changes. When prices fall, their customers benefit quicker.

"But when they're rising, they normally feel this quicker. It would be difficult for the big six to justify a hike based on a short-term blip. Just as they haven't reacted to recent falling prices, they are unlikely to knee-jerk to rising prices.

"The trend of higher wholesale prices needs to be consistent before consumers should worry."

Andrew Horstead, an analyst at Utilyx, is less optimistic, but still stops short of predicting rises: "The consensus is wholesale prices will stay high. The big six will be under enormous pressure to pass on higher costs to consumers."

All the big six energy firms — British Gas, EDF, Eon, Npower, SSE and Scottish Power — announced in January they would reduce either their gas or electricity prices, not both, by a typical 5%.

Most of those falls have come into force already, although Scottish & Southern's drop only happens on 26 March. However, the reductions failed to get anywhere near reversing the up-to-19% jumps for gas and electricity imposed last year.

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