Consumers have been warned to brace for a new round of energy price rises within weeks because suppliers are under pressure to pass on increases in wholesale costs.
Bulb, one of the fastest-growing small suppliers, said on Tuesday it would be putting up its dual fuel electricity and gas tariff by £24 a year to £879 for a typical annual bill. The increase would have been £63 if not for measures the firm had implemented.
Hayden Wood, the company’s co-founder, said it had seen wholesale costs rise by 11% since last July. “When wholesale energy costs move, so does our tariff,” he said. The move will affect 300,000 customers.
Industry sources and analysts said they expect bigger players to break ranks shortly and announce price rises for millions of households.
An energy executive said they expected rivals could increase prices by up to 9%, which would add about £100 to the average big six standard variable tariff of £1,135. Others expect the figure to be more like £50.
Energy regulator Ofgem will publish an update on the costs facing energy suppliers on Wednesday.
An industry source said they expected it to show a 5-6.5% increase based on rising wholesale prices and other costs, including clean energy subsidies paid through bills.
Ofgem has already fired the starting gun for the 5 million vulnerable customers who have their bills capped, lifting the ceiling by £57-a-year from April.
Announcing the decision last month, the regulator said wholesale costs of gas and electricity this summer would be up £17 to £378 compared to last year, while government environmental and social policy costs would be up £10 to £135.
Deepa Venkateswaran, an analyst at Bernstein bank, said: “I think people will use the pre-payment meter cap [increase] as the reason [for hiking other tariffs]. I don’t see why people would not raise their prices.”
She said she would be surprised if British Gas was first to break cover, saying it was more likely to be EDF, E.ON, npower or ScottishPower.
Robert Buckley, an analyst at Cornwall Insight, said: “I think it’s very hard for them to suck up prices of this magnitude for a long period of time.”
He said that with the government introducing legislation in parliament this week for a price cap for 11m households by next winter, the political stakes were very high for companies considering an increase. “If you do move, you’re not going to get a very good reaction,” he said.
Freezing temperatures this week have driven up within-day wholesale gas prices by more than a quarter to 82.50p per therm as millions of people fire up their boilers. That will be felt more keenly by small suppliers, unlike the big players who hedge far ahead.
Several industry sources said it was possible the weather had delayed announcements, because no one wants to be seen putting up tariffs while it was so cold.
The previous round of price rises started with EDF in December 2016, followed by npower in February 2017 and three of the other big six suppliers shortly after.
A senior energy figure said firms were in a “Mexican stand-off”, watching each other to see who would go first this time.
Industry watchers said the move by Ofgem to hike the price cap for vulnerable people would provide some cover for firms, who could point to the regulator’s decision.