Npower is the latest energy firm to raise its prices, but with wholesale prices stable contrary to energy firm claims – what are the real reasons behind the price hikes?
SSE was the first to increase prices, hiking them by 8.2% from 15th November, British Gas soon followed and will raise its prices by 9.2% on 23rd November, and now Npower has said their price will rise by 10.4% on 1st December.
According to Ofgem, the energy regulator, wholesale energy prices have remained stable for the last 18 months with small fluctuations, whilst consumer prices have steadily increased by around 8%, with most of that rise coming in the last 6 months.
Whilst blaming wholesale price increases may be a little bit of misdirection, energy firms are facing increased taxation with government polices trying to push down carbon emissions and protect the environment, and distribution costs through the national grid have risen for suppliers.
After one energy supplier increases their prices, that paves the way for others to follow suit as market pressures to keep prices low are eased. It may be a tough decision for a company to lead the way in a price increase, but once one or two major suppliers have raised their prices, the market will not punish the others from following.
This unified pricing increase is not the result of price-fixing or anti-competitive behaviour, but it does look suspicious to onlookers. The energy firms may be facing the same pressures on prices, which will cause them to act in similar ways, but the timing of the increases is simply down marketing, and once one firm has increased their prices the others that follow will receive less negative press.