Energy bills to rise yet again as wholesale costs rocket

HOUSEHOLDS have been warned to brace themselves for fresh hikes in gas and electricity prices before next winter as energy suppliers pass on higher costs to their customers.

A 20 per cent spike over the last month in the price of gas on the wholesale market, where energy companies buy their supplies, has sparked fears that energy bills could jump later this year.

And experts predicted that recent aggressive competition for the lowest rates could be over after what was previously the cheapest deal on the market was increased this week to make it the most expensive.

Higher energy costs would pile the pressure on tens of thousands of households still reeling from record fuel bills after Scotland's coldest winter in 50 years. The average household was slapped with a dual fuel bill of 532.70 for the period from January to March, up 57 on last year's record 475, energyhelpline.com said.

Energy bills have fallen gradually in the past two years after peaking in 2008, with the big six suppliers all trimming bills earlier this year. The cost of wholesale gas has fallen by some 60 per cent after a spike in mid 2008, triggering an average 42 per cent increase in gas and electricity prices.

Yet despite a series of price cuts since early 2009, the average bill has fallen by just 4 per cent, according to price comparison website uSwitch.com.

And as wholesale prices creep up again, the prospect of household heating bills bouncing back up this year is growing. The big six suppliers buy their energy supply several months in advance, suggesting a sustained increase in wholesale prices could feed through to bills in time for next winter.

OVO Energy this week became the first energy supplier to lift prices in 2010 when it announced an average 8 per cent increase in its dual fuel online tariff, previously the cheapest available.

Scott Byrom, utilities manager at moneysupermarket.com, said a continued rise in the cost of wholesale gas could prompt others to follow OVO's lead.

"We all know the energy companies tend to act like a house of cards – once one goes, the rest will follow. Should we see a summer of price rises, I'm sure many consumers will be extremely concerned about their ability to afford their energy bills, especially later this year as we approach the winter months."

Joe Malinowksi, of comparison website theenergy- shop.com, said Ovo and First Utility had forced prices down in recent months, adding significance to the former's price hike. "Fixed energy tariffs are currently being offered at a big discount to standard energy prices, and this is likely to change soon," he said.

"There is a good chance that discounted tariffs, which include fixed-rate tariffs and online tariffs, are going to go up soon as there is now much less of a margin between those prices and wholesale prices (than on standard tariffs]."

Almost half a million British Gas customers were warned last month to prepare for higher bills when their five-year fixed-rate deals come to an end.