Reputation is in the eye of the stakeholder

Speculation that households could soon be hit by a second round of rate hikes have increased after two of the big six suppliers, British Gas and SSE, warned the public that “challenging” market conditions would force the suppliers to pass on higher costs to customers.

Experts also warned of “significant evidence” that higher wholesale prices will push customer’ bills up further after suppliers pulled their cheapest fixed-price deals from the market. Specifically, British Gas withdrew its WebSaver 11 and replaced it with WebSaver 12, which costs £60 more on average per year while npower’s replaced its £960-a-year Go Fix 5 with Go Fix 6 at an increase of 4.2% for gas and 8.5% for electricity. SSE, which has suffered reputational damage from mis-selling accusations, warned that customers should expect an increase in prices over the next year due to increased wholesale prices after increasing its tariff by 18.5% last year.

While customers are struggling with rising energy costs and soaring inflation, there is more positive news for shareholders. Strong annual results from National Grid and SSE promise higher than expected dividends from these companies following increased revenues. Across the big six, profits increased by 26% in 2009 with British Gas reporting record profits of over £2 billion.

This article was written by Nicholas Chrysanthou, energy consultant analyst at Alva and released in full on Energy Business Review.