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Energy price hike cancelled: will the Big Six follow suit?

As Ovo Energy cancels plans to increase its bills, British Gas promises to introduce simpler, fairer and more transparent tariffs for all.

 
Energy price hike cancelled: will the Big Six follow suit?

Ovo Energy has cancelled plans to hike its prices this winter after wholesale costs fell lower than expected.

The news comes as British Gas promises to overhaul its energy tariffs in a bid to help make buying energy a simpler, fairer and more transparent process for customers.

Ovo Energy’s move to cancel its 3.5% price rise, scheduled for 1 January 2012, will affect 10,000 customers on its variable rate tariffs – just over a sixth of its total customer base of 69,000. The increase would have seen customers' bills jump from £1,120.02 a year to £1,158.87.

Stephen Fitzpatrick, managing director of Ovo Energy, said: ‘Since we announced the planned increase in our variable prices, on the 26th October, wholesale costs have fallen. In response to this change in the market we’re delighted to announce that we will not go ahead with the planned increase’.

All of the major energy suppliers have increased their gas and electricity prices in the last few months, some by as much as 19%.

Customers hoping the Big Six energy suppliers – British Gas, EDF Energy, E.ON, Npower, Scottish and Southern Energy and Scottish Power – will follow suit and cancel their price increases, however, are likely to be disappointed, according to Mark Todd, director of price comparison website Energyhelpline.com.

‘Ovo is a smaller supplier and we are not expecting price drops from any of the major providers at the moment’.

‘Wholesale energy costs have fallen by 16.5% since early September, according to energy analysts ICIS Heren. However, even though we would like to see domestic prices follow suit we believe the chances of big drops now are low and they are not likely to come before the spring,’ he added.

Tom Lyon, energy expert at uSwitch.com, agreed with Todd, though added Ovo's move leaves the big six looking 'rather exposed'.

'Do we expect the big six to follow suit – certainly not for a while,' he said. 'Because of how they buy their energy – in long-term forward contracts – it takes time for a change in wholesale prices to work its way through to customers. Suppliers like to see a sustained and consistent trend in wholesale prices before acting'.

Audrey Gallacher, director of energy at Consumer Focus, however said Ovo's announcement is a 'good sign'.

'A smaller supplier such as OVO may be able to react more quickly, but it obviously can’t operate on the same economies of scale as its much larger rivals. If it can cancel price rises because market fundamentals change, it begs the question why can’t others?' she said.

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6 comments so far. Why not have your say?

White Stick follower

Nov 24, 2011 at 18:02

This is coming up to my third year with OVO. I have fixed for December 2011 for one year I am happy to see this news just the same.

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Alan Tonks

Nov 24, 2011 at 18:53

The big six will lower their prices when Hell freezes over, which is never.

Leopards do not change their spots and neither do the energy leeches.

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Samuel Hill

Nov 24, 2011 at 20:47

No wonder the energy prices are forever increasing, the production companies are shutting down worldwide to keep wholesale prices high.. Supply and demand drives the prices. lower supply then prices skyrocket. They are great at hiding the truth - do less, get more PROFITS. The consumer is a mug for accepting this state of affairs.

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georges

Nov 24, 2011 at 20:55

Saw Paxman shred the CEO of BG yesterday. One participant raised the subject of his 1.8m remuneration. He should have his remuneration tied to optimising BG profits at 5% - the so called going rate - with bonus falling as he moves away from this target, and also it should be tied to a cap on disconnections for fuel poverty. ie if we don't get heat, he does not get paid. After all, his job is to supply gas as efficiently as possible to all his consumers.

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Graham D-C

Nov 26, 2011 at 11:39

georges

Wrong. His job is to produce the best results for the shareholders. He is not a government employee.

That said, all senior execs of UK companies should have their pay, incentives/ share options/pensions, tied to a multiple of the lowest paid worker in the company. The bleat that companies would not be able o attract the right calibre of people is total hogwash as so proven by a number of ' top bankers' who testifed they held no directly related financial qualifications.

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mr davies

Nov 26, 2011 at 21:20

in reply , i have seen some people tht deserve betterrecoginition for there for there input ,but in saying that so many hangers on because they get a little backhanders its rife in whatever industry , its only like the hackers scenrio take the lid off ,u will be surprised what u find

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