No plans for Ovo, First Utility to reverse Q1 price hikes

Independent energy suppliers Ovo Energy and First Utility have no plans to reverse the retail price increases made in the first quarter of this year, despite the steady fall in wholesale power costs since then.

Falling market prices for gas and power over recent months have prompted calls for the ‘big six’ utilities to cut their prices, with First Utility saying in a statement last week that it is “only right” for savings to be passed on to consumers.

However, both independent energy providers told Utility Week that they have no plans to reflect the falling costs themselves.

“First Utility is hesitant to speculate on future prices and does not have any plans to reduce the iSave Everyday tariff,” a spokesman for the company said.

The retailer lifted its variable tariff by 3.5 per cent in February this year to take effect in April, but last week backed Ofgem’s call for the big six to explain why bills haven’t fallen despite wholesale prices hitting four year lows.

“Energy wholesale prices have dropped since the start of the year and we believe it’s only right that these savings are passed onto customers to help lower their energy bills,” said First Utility’s Chief Customer Officer Ed Kamm last week in a statement.

Ovo Energy said in April this year that its 2 per cent price increase was to reflect a jump in April wholesale energy prices, saying: “If we see a drop in things like wholesale costs or network costs we drop our prices like we did [in March]. If we see those costs increase like this month, we need to reflect that too.”

But Ovo also has no plans to pass on the recent market losses.

“We are keeping a very close eye on the [market] situation,” the spokesman said, adding that Ovo conducts monthly cost reviews to ensure the supplier offers its 340,000 customers “cost reflective” tariffs.

Heightened tensions in the Russia-Ukraine region over the sovereignty of Crimea caused markets at the start of April to react bullishly to the risk of a possible gas supply disruption. Since then, ample gas storage levels and healthy supply across Europe have caused pricing levels to slump to lows not seen since 2010.

For example, the price of gas for use this Winter averaged just 56.55 p/th over March, data from market specialist Platts shows. April saw pricing levels react strongly to the Russia-Ukraine crisis to average 65.96 p/th – but the temporary gains were quickly eroded, with winter gas falling to an average price well below that seen in January and February at 63.28 p/th over May.

The Ovo spokesman added that wholesale market costs are not the only factor in determining a change in tariff rate.
“There are any number of external factors you need to take into account – you need to be aware of the context,” he added.