With PowerGen joining the supplier rush to raise prices (24% in gas, 18% in power) for domestic customers, they are now the 5th of the large suppliers to raise prices, the feeling that it is all going up is quite easy to develop. There is no doubt that the wholesale rises are now being placed firmly in the customers court, but customers have benefited from being allowed to lock in long term prices, at levels dangerous close to current wholesale prices.

The decision to fix your mortgage or to remain variable is always a difficult one, but traditionally those who have floated have benefitted, because interest rates have not been that volatile. Interestingly power prices have been very volatile, and the opportunity for suppliers to buy on the market dips has decreased, and this has not surprisingly, made them cautious and in most cases, raised prices to all time highs to reflect that the losses incurred in 2005 need to be recouped.

If the suppliers do reduce prices they will be slow to do it and will point to trying not to produce any more price increases. If the market stabilises, then in theory competition will kick in and they will guage when to drop price to increase customers. This should attract niche players, but with recent price credit problems there are real barriers to entry for the UK power market. Suddenly we are at classic oligopoly, and the kinked demand curve suggests that we are now in for a period of stability for customer prices.