Ofgem encouraged energy companies to swallow the increase in energy costs and not pass the price hikes to consumers.
Due to the gains in wholesale energy markets and the renewable energy programme of the Government, the regulator estimates that the cost of supplying energy has soared 15pc in a year. However, Ofgem chief executive Dermot Nolan said that the energy suppliers should swallow the hike by being more competitive:
“It’s not obvious that there should be significant price increases across the market and it would be up to suppliers to justify this to us and to their customers,” said Mr Nolan.
Due to prices failing to fall when cost where sliding lower in 2015, the regulator advises that the standard variable tariffs should hold steady because they were too high already. Mr Nolan stated that bills should not be that quick to rise if they are slow to fall:
“The key point energy companies make about hedging is that if costs are falling, you cannot expect retail bills to fall as quickly because they smooth out the market impact on bills. But it works the other way, too.”
At the same time, Mr. Robert Buckley, a director at consultancy Cornwall Energy said in late 2016 that there was no reason why the big six suppliers – British Gas, SSE, EDF Energy, Eon UK, npower and Scottish Power – should not be able to hold energy prices at the same level for several months at he beginning of 2017.
However, he warned the consumers that an increase in price should be expected by late 2017.