Less than two weeks after Ofgem issued a statement explaining that energy suppliers had no obvious reason to raise their energy prices over coming months, Npower has announced that their dual fuel customers will see bill increase by an average of almost 10% from March.
The big six provider will be increasing prices for electricity by 15%, and for gas by 4.8% starting from March 16th this year. This will raise the cost of a dual fuel tariff for around half of their customers by 9.8% – equivalent to an average of £109 per year.
Customers with fixed rate plans will not be affected, nor will those with pre-payment meters. Further, any customers who currently receive the warm home discount will have their price increase delayed until May.
The price increases for both services are some of the largest seen by any supplier in recent memory and have drawn criticism from various directions including Ofgem, the Government, and even Npower’s former CEO Paul Massara. Massara, who now runs solar energy company North Star Solar Ltd who posted a Tweet saying that the rise was “shocking”.
Npower cited rising wholesale energy prices, as well as increasing costs of delivery, as their reason behind the price hikes. They also explained that they had delayed the hike for a few months in order to protect customers. Simon Stacey, managing director for domestic markets at the supplier, said: “This is a hugely difficult decision, and we’ve delayed the date this takes effect until after one of the coldest months of the year”.
However, Ofgem’s recent report argued that rising wholesale costs should not be used to justify price increase for customers, due to energy suppliers practise of long term hedging – buying energy in advance in order to protect themselves against exactly this kind of wholesale price fluctuation.
Following Npower’s announcement, an Ofgem spokesperson said: “We don’t see any case for significant price increases where suppliers have bought energy well in advance. Npower must therefore justify the decision to its customers.”
A spokesperson for the Department for Business, Energy and Industrial Strategy also spoke out, saying: “We are concerned by Npower’s plans to increase prices for customers who are already paying more than they need to.
“Suppliers are protected from recent fluctuations in the price of wholesale energy, which they buy up to two years in advance, and prices remain significantly lower than in 2014.”
