Scott Byrom: First to blink in the energy 'herd' takes all the flak

THIS is the first rise from ScottishPower since it put its prices up at the end of last year - and it is something we have been expecting.

The energy market operates in a very consistent way and it is a kind of "herd" mentality. Once one provider moves the others will follow.

British Gas has put a warning out, Scottish & Southern followed and we know it is coming, so on that basis it is not a surprise. But to say whether ScottishPower is justified in announcing such a large increase is difficult to judge.

The energy providers are all private companies, they have got shareholders, they have got costs - and some of those costs are related to wholesale energy prices. One of the reasons for the rise in those prices is the unrest in the Middle East, which is pushing wholesale prices higher.

Also, we do not fully understand the scale of the investments energy companies are hoping to make over the next few years - they could be investing heavily in wind turbines and wind farms and other renewable energy sources.

We know there is a huge investment to be made for all the energy providers to move the entire country onto smart meters, which will put pressure on their costs.

We have obviously got to a point that ScottishPower can no longer take the hit - and it has to increase its prices.

It is a huge amount. However, I think the fact that it has increased its prices gradually is fair.

Winter is the key part of your energy bill - this is when consumers use 40 per cent of their annual consumption. If ScottishPower had taken the decision to hold off now and increase prices by more in November instead, it would have had a detrimental impact on everyone's winter bills.

I would have thought that over the last few months, every single provider would have been monitoring the price of wholesale quite closely and looking at their costs.

There would have been a lot of to-ing and fro-ing with who was going to make the first move, knowing that generally whoever makes the first move gets all the negative press, which impacts on its customer base the hardest.

It just boils down to who can afford it - who has the deepest pockets. I would not have thought it is a decision the firm would take lightly.

l Scott Byrom is utilities manager at the comparison site Moneysupermarket.com