Ofgem does not set energy prices. Ofgem’s role is to ensure that the market works in the interests of energy consumers. Energy prices are determined by the suppliers themselves based on their assessment of the wholesale and retail markets. It is up to energy companies themselves to explain their prices changes and profits to their customers and investors.
The relationship between wholesale and retail energy prices is complex. Suppliers buy gas and electricity in advance of when it is delivered to customers. They may not always pass on wholesale cost increases immediately and falling wholesale prices may not immediately result in bill reductions.
We recommend that all energy consumers regularly check that they are on the cheapest tariff that best suits them. You can find further information on switching on our ‘Saving money - Energy Best Deal’ webpage.
Stop Press! Latest update:
- Today we have published details of our latest RMR proposals to simplify standard tariffs in an accompanying factsheet
- We published our latest Supply Market Report analysis that shows the movement of wholesale costs compared with customer bills and recent increases
- We have published a factsheet which explains why prices are increasing
- We have appointed independent accountants BDO to carry out a detailed examination of energy suppliers accounts and their treatment of wholesale costs
- We will publish our next set of proposals in November/December
Click here to see the full press release.
Ofgem's monitoring work
We now publish regular reports showing the relationship between wholesale and retail energy prices to improve price transparency for customers. These reports explain the different costs suppliers face and how these compare with customer bills. The reports can be downloaded from the ‘Further resources’ box to the right of this page.
The Retail Market Review (RMR)
Our current Retail Market Review identified several areas of concern that suggested the market was not working as it should. To address this we have (among other things):
- consulted on radical proposals to simplify and reduce the number of standard tariffs to help customers compare deals more easily
- proposed that suppliers auction off up to 20% of the power they generate to help other suppliers enter the market
Updated 14th October 2011