Where the price hikes overdone….?

Wholesale Prices October 2011

Wholesale Prices October 2011


Ofgem today (14 October 2011) issued its latest Electricity and Gas Supply Market Report. The report calculated that the net margin on supplying a typical, standard tariff dual fuel customer over the next year would be £125 per customer. This represents an increase of £110 from the previous figure of just £15 per customers and is driven almost exclusively by recent energy price hikes by energy suppliers.
 
Energy prices recap from TheEnergyShop.com
Since 1 October 2010 consumers have endured 2 sets of energy price hikes which have increased the average dual fuel Standard tariff by £213 to £1195 for customers paying by monthly direct debit. The increase of 22% is over 4 times the rate of inflation (see Table 1 below). Retail energy increases have taken energy prices to a level that is 12% above their previous peak in late 2008 (see Table 2).
 
The primary cause of these increases has been rising wholesale energy prices, particularly for gas which has risen by 40% over the past year. However, despite this increase, wholesale gas and electricity prices are still nowhere near the peak levels seen in mid 2008, with gas prices a third lower and electricity prices 40% lower.
 
At the time of the first price rise announcement (by ScottishPower on 7 June 2011), we wrote
 
“We expected to see some energy price rises but not on this scale.”
 
This was based on analysis by TheEnergyShop.com which showed that the spread between retail and wholesale prices had narrowed but was still healthy by historical standards (see chart below).
Wholesale Graph October 2011

Wholesale Graph October 2011


Ofgem’s analysis now lends support to our initial concerns that the level of the increases was probably overdone.
 

What we think:
 
Ofgem’s analysis supports our view that the last set of price increases was overdone. However, those increases are here to stay which means that the best consumers can do now is to mitigate the impact as far as possible.”
 
The good news is that switching to a discounted online tariff can save you up to £170 compared to standard prices and undo most of the increases seen over the past year. You’ll only benefit if you switch and it’s best to do it now before racking up big bills over the coming winter months.

 
Table 1 – Standard Bills over the past 12 months

Standard Bills past 12 months

Standard Bills past 12 months


Source; www.TheEnergyShop.com
The prices shown are for the relevant suppliers’ Standard tariff for customers paying by monthly direct debit and based on an average usage profile (16500 kWh gas and 3300 kWh electricity on a standard meter).

 
Table 2 – Peak prices compared
Peak prices compared Oct 2012

Peak prices compared Oct 2012


Source; www.TheEnergyShop.com
The prices shown are for the relevant suppliers’ Standard tariff for customers paying by monthly direct debit and based on an average usage profile (16500 kWh gas and 3300 kWh electricity on a standard meter).

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