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Energy prices may rise, warn suppliers

Wholesale prices fall, but fuel bill cuts unlikely


Gas prices have risen by 33.8% in the last 12 months

The ‘big six’ energy suppliers have indicated to industry watchdog Ofgem that gas and electricity prices are unlikely to fall over the next year, and may even increase.

Ofgem estimates that energy companies will make gross margins of £170 per dual fuel customer over the next 12 months – thanks partly to the recent fall in wholesale energy costs.

But energy companies say they expect a rise in wholesale prices next year.

The energy watchdog’s latest quarterly report states: ‘Our analysis shows that based on an 18 month hedging strategy and assuming that retail prices remain unchanged, projected gross margin is set to increase by around £80 for dual fuel customers over the next six months.’

A study by Consumer Focus earlier this month suggested energy companies were overcharging customers by around £100 a year.

Energy companies respond

Ofgem published its report along with letters it received from the ‘big six’ energy companies British Gas, Eon, Npower, Scottish & Southern Energy, Scottish Power and EDF Energy. Ofgem wrote to each firm last month ‘telling them they owe it to their customers to better explain their pricing position to them’.

In its response, British Gas said: ‘Prices [are] likely to remain at historically high levels, and in fact likely to increase as non-commodity costs rise ever upwards.’

EDF energy said it ‘would of course be prepared to reduce tariffs if market conditions allowed’, while Scottish Power concluded: ‘There are no immediate signals that would indicate a fall in retail prices for this winter, and risks of an increase next year.’

You can find the full responses from all six energy suppliers published in full on Ofgem’s website. Ofgem also pointed out that about 30% of a customer bill was made up of costs unrelated to wholesale energy prices, including environmental commitments and network charges. 

Cut energy costs

According to Reena Chityal of Which? Switch, Which?’s energy comparison and switching service: ‘With the likelihood that energy companies will not be announcing further price cuts this year, we encourage customers to check they are not paying over the odds for their energy and switch to a cheaper tariff now, before the cold months set in.’

You can compare prices and tariffs in a few minutes to find the best deal for you. Those switching with Which? Switch between August and December 2008 saved an annual average of £257.

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