LONDON (Reuters) - Britain’s regulator is expected to let energy suppliers increase consumer bills from April by raising the annual price cap by about 100 pounds, analysts and industry sources said.
Ofgem, which is expected to make its announcement this week, was tasked by parliament to set a cap after lawmakers said customers were being overcharged for electricity and gas. Prime Minister Theresa May had called the tariffs a “rip-off”.
The cap for average annual consumption was set at 1,137 pounds from Jan. 1. It will be revised in April.
“We expect the price increase to be 100-110 pounds, mostly driven by a wholesale price refresh and a small element from policy driven costs,” Bernstein senior analyst Deepa Venkateswaran said in an email.
Ofgem calculates the cap using a formula that includes wholesale gas prices, energy suppliers network costs and costs of government policies, such as renewable power subsidies.
Several of Britain’s biggest suppliers, a group known as the “Big Six,” complained that the cap was initially set too low. Most are expected to increase prices once it is raised.
Britain’s largest supplier Centrica is seeking a judicial review of the way the cap was calculated. Innogy’s npower said the cap was partly why it announced plans to shed 900 jobs last week.
Smaller, independent suppliers have said prices should not rise. Some of them have been able to cut consumer prices by relying on app-based technology and other steps to reduce costs.
“We see no reason why anyone else should raise their prices,” Hayden Wood, founder of Bulb, told journalists, adding that his company expected the cap to rise by about 100 pounds but would keep prices unchanged for its 870,000 customers.
Pure Planet, a supplier in which oil major BP has a 25 percent stake, said on Monday it would lower its average bills by 12 pounds a year to 986 pounds per year.
Steven Day, co-founder of Pure Planet, said raising the cap should not be used by providers as an excuse to hike prices to match or fall just below it.
But SSE, one of the “Big Six”, said wholesale prices had climbed.
“Faced with the option of selling energy at a loss, breaking even, or making a small profit margin, any responsible and sustainably run business will choose to price appropriately to recover costs,” SSE Energy co-head Stephen Forbes said in a email.
Reporting by Susanna Twidale; Editing by Edmund Blair