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Source: Ofgem analysis of companies’ Consolidated Segmental Statements.

Information correct as of: August 2019

This chart shows the Earnings Before Interest and Tax (EBIT) margins for the generation activities of the six large energy suppliers in the GB market. 

A company’s EBIT margin is their revenue minus their costs, before accounting for taxes and interest. These margins have been divided to highlight variations in profitability for different types of power generation technology.

Policy Areas:

  • Electricity - wholesale markets

Data Table

Large suppliers: Electricity generation profitability by technology type in 2018 (GB)
CompanyNuclearConventionalRenewable
Centrica6.7%1.0%0%
E.ON0%*48.9%
EDF Energy-3.5%-11.7%32.7%
RWE0%-4.4%45.3%
ScottishPower0%2.6%48.6%
SSE0%-1.47%45.94%

More information

Electricity generation profitability by technology type: At-a-glance summary

Profitability of electricity generation for the six large suppliers active in the electricity wholesale market can be shown through analysis of their Consolidated Segmental Statements (CSS). There has been a marked reduction in conventional generator profitability in recent years. On the flip side there has been an increase in renewable generation profitability.  

Relevance and further information

The Earnings Before Interest and Tax (EBIT) margin is a useful indicator of trends in energy company profits. The level of profit in a market is a good measure of how competitive that market is. Here we have shown profitability by power generation technology type to indicate which forms of technology generation are most profitable for generators. 

Methodology

EBIT is calculated by subtracting the total direct costs, total indirect costs (such as operating costs) and depreciation and amortisation for supplying energy from a supplier’s total revenue.

The EBIT margin is calculated by dividing a supplier’s total revenue by the EBIT value. It is expressed as a percentage, so the figure is multiplied by 100.

We have split margins into conventional generation (eg coal, gas, oil), renewables (eg wind, hydro) and nuclear.

The data in this chart may differ from the data that can be found in the supplier’s externally published Consolidated Segmental Statements (CSS). This is because we have made some adjustments to improve comparability. These mostly relate to removing certain impairment and restructuring costs. Detail on these adjustments can be found in Ofgem’s review of 2018 CSS.

Following E.ON’s deconsolidation of Uniper on 31 December 2016, the activities of Uniper UK Limited are not included in E.ON’s UK CSS for 2018. As a result, E.ON’s revenues from conventional generation have significantly decreased from 2016 and E.ON’s EBIT margin from conventional generation is -109.8%. This has not been included directly in the chart as it is not directly comparable with the margins for the other six largest suppliers.   

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Javascript is required to render chart Electricity generation mix by quarter and fuel source (GB).

Source: BEIS Energy trends section 5: Electricity (ET 5.1) .

Information correct as of: July 2019

This chart shows quarterly totals of electricity generation by technology type for the GB National Electricity Transmission System, as well as net imports.

Policy Areas:

  • Electricity - wholesale markets

Data Table

Electricity generation mix by quarter and fuel source (GB)
DateCoalOilGasNuclearHydro (natural flow) Wind (onshore and offshore) and SolarBioenergyPumped storage (net supply)Other fuelsNet imports (Interconnectors)
Q1 200647.562.0629.9820.521.111.092.37-0.340.871.4
Q2 200628.55133.6918.210.960.792.13-0.250.782.86
Q3 200626.861.0735.3617.240.671.012.11-0.310.81.62
Q4 200638.521.2938.7313.261.821.352.49-0.30.81.63
Q1 200737.021.2242.8214.121.941.652.26-0.280.761.12
Q2 200724.11.0343.4713.730.840.931.96-0.280.860.89
Q3 200725.620.8136.5515.730.941.191.98-0.330.92.66
Q4 200742.291.439.5513.661.311.512.34-0.340.780.54
Q1 200833.421.0347.6113.141.972.222.18-0.290.812.42
Q2 200826.291.2141.9311.080.841.272.05-0.30.83.56
Q3 200822.011.5243.2810.960.731.312.07-0.350.683.72
Q4 200836.332.1340.1712.491.572.352.32-0.350.741.33
Q1 200937.811.8837.2715.41.562.62.53-0.330.780.57
Q2 200919.11.0338.1116.450.911.982.28-0.260.712.78
Q3 200915.571.0342.0716.11.132.122.23-0.290.80.81
Q4 200925.321.4246.0114.811.62.62.57-0.290.74-1.3
Q1 201030.971.2947.3316.520.842.432.7-0.290.6-1.69
Q2 201018.550.8344.6812.610.651.672.66-0.270.631.42
Q3 201018.811.0340.1111.820.852.772.84-0.230.612.76
Q4 201033.861.1640.3415.491.233.452.94-0.280.560.18
Q1 201133.360.8137.5917.671.293.412.99-0.260.71.06
Q2 201118.090.5136.2517.41.133.692.8-0.220.71.53
Q3 201118.150.737.9214.311.223.122.98-0.230.732.36
Q4 201133.410.7932.0513.2825.993.07-0.240.531.27
Q1 201239.910.7726.7115.621.825.253.45-0.260.731.99
Q2 201229.630.6124.7716.830.794.332.63-0.240.813.12
Q3 201227.310.522.5416.381.054.913.11-0.250.824.06
Q4 201238.670.724.2515.121.636.713.75-0.270.822.7
Q1 201339.30.4726.7116.611.246.923.58-0.270.792.81
Q2 201327.360.4223.714.050.967.194.4-0.260.833.56
Q3 201325.190.5420.9516.970.745.593.86-0.260.784.65
Q4 201331.730.4422.6616.51.7310.713.83-0.250.783.4
Q1 201432.770.4921.3115.012.2211.523.91-0.260.924.89
Q2 201420.960.4723.3315.91.16.64.7-0.250.885.08
Q3 201415.080.4128.6214.220.776.695.12-0.240.95.43
Q4 201426.270.3825.7412.771.7411.25.8-0.260.935.12
Q1 201528.040.4723.1916.51212.786.05-0.251.114.96
Q2 201515.190.3823.0215.371.4111.446.1-0.231.075.6
Q3 201512.170.4926.0615.041.029.926.11-0.251.095.92
Q4 201516.580.525.7316.981.8213.687.14-0.251.034.62
Q1 201613.940.333.4515.752.1612.997.45-0.271.36.04
Q2 20164.340.5133.8215.130.9711.126.72-0.261.25.36
Q3 20162.570.4132.0417.131.1911.935.38-0.231.254.74
Q4 20168.250.4941.317.141.2511.636.62-0.31.431.61
Q1 20179.90.3437.2516.031.8814.57.64-0.291.182.61
Q2 20171.460.3331.2216.20.914.86.67-0.251.195.25
Q3 20172.050.4229.6216.511.313.596.61-0.211.195.3
Q4 20177.970.3936.1515.161.7918.646.21-0.251.221.6
Q1 20188.260.4636.2315.121.5719.186.43-0.270.945.38
Q2 20181.150.2831.5215.1115.137.52-0.240.955.15
Q3 20181.760.3128.5215.670.8915.167.68-0.20.934.93
Q4 20184.80.4732.813.211.9520.578.7-0.190.993.65
Q1 20192.890.2735.7612.631.7220.527.38-0.191.426.05

More information

Electricity generation mix: At-a-glance summary

The GB electricity system is undergoing a period of significant change as we transition from a large-scale conventional fossil fuel dominated generation mix to intermittent renewable generation. Over the past few years, we have seen a marked increase in output from wind and solar farms. Since 2015, the share of electricity generated from gas increased, while the share generated from coal decreased. This was partly due to improved economics for gas-fired generators.

Relevance and further information

The electricity generation mix is a useful indicator of trends in the diversity and origin of electricity in GB.

Methodology

Positive values represent supplies to the GB system. This includes electricity produced by GB power stations and imports via interconnectors. 

Negative values represent supplies from the GB system (excluding end consumer demand). This includes power demanded by GB power stations and exports via interconnectors. 

Data marked as ‘(net)’ is underpinned by both positive (generation) and negative (demand) values. For instance, interconnectors can both import and export electricity. Similarly, pumped storage can both demand electricity to pump and generate electricity when releasing water through its turbines. As data is summarised as quarterly values, the net calculation for certain generation sources underestimates the full extent of generation and demand.

The data is updated quarterly using BEIS’ Energy Trends publication. Some historical figures may differ because of rounding.

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Chart

Source: Ofgem analysis.

Information correct as of: May 2018

This chart shows the contribution of trends in different cost categories to the overall year-on-year change in the Supplier Cost Index.

This chart is no longer being updated.

At-a-glance summary

Between May 2017 and May 2018, the Supplier Cost Index increased by 14.1%.

  • The increase was primarily driven by increases in the wholesale costs of both gas and electricity accounting for 12 percentage points of the 14.1% increase in the index. Wholesale gas prices have increased slightly more than wholesale electricity prices.
  • The costs of government obligations related to supplying electricity (particularly programmes associated with supporting renewable and low-carbon electricity generation). These costs increased the dual fuel index by 1.9 percentage points.
  • The costs of government obligations related to supplying gas have remained largely unchanged.
  • There were in addition, smaller increases in network charges related to supplying gas, which are very nearly offset by a reduction in network costs related to supplying electricity.

We update this chart on a quarterly basis. Click the ‘more information’ tab above for details of how to interpret the figures in the chart and for information on how the index has been calculated.

Policy Areas:

  • Electricity - retail markets
  • Gas - retail markets

Data Table

Breakdown of the year-on-year change in the Supplier Cost Index
Impact on Cost Index (May 2018 vs. May 2017)
Wholesale (electricity)5.8
Wholesale (gas)6.2
Network (electricity)-0.3
Network (gas)0.5
Government obligations (electricity)1.9
Government obligations (gas)0.0

More information

How to interpret the year-on-year change in the Supplier Cost Index

The breakdown is calculated by combining the percentage change in each category of expected costs, with an estimate of the importance of that cost to suppliers' total costs. Adding the bars together gives the overall change in the index.

Note, therefore, that the percentages shown are not the same as the percentage change in the individual categories of costs. For example, if the chart shows a one percentage point contribution for wholesale gas this does not mean that wholesale gas costs have risen by 1%, rather that there has been an increase in wholesale gas costs which has caused the overall cost index to rise by 1%. As wholesale gas costs make up only one part of suppliers' overall costs, the percentage increase in these costs would have been significantly higher to result in a 1% increase in the overall cost index.

It is important to bear in mind that the contributions shown relate only to the direct charges to suppliers associated with the different types of costs, and do not take into account the relationships between the categories.

For instance, trends in network charges to electricity generators are not included in the ‘network charges’ component of the breakdown, as they are not paid directly by suppliers – and will instead affect wholesale electricity prices. To give another example, a reduction in wholesale prices (and so the wholesale cost component of the index) will be associated with an increase in supplier payments to fund Contracts for Difference, which support low carbon electricity generation.

For this reason, the contribution of different types of costs to the index cannot be interpreted as showing the totality of the impact of government policies or network charges on consumers’ bills.

Methodology

  • We calculate the Supplier Cost Index by estimating trends in network charges, wholesale prices and the charges to suppliers associated with government programmes (note that in some cases, these government charges only apply to large and medium-sized suppliers).
  • These estimates are then combined with information on the relative scale of each of these categories of cost to calculate the trend in the overall Supplier Cost Index. The weights given to each category of costs are based on financial statements from the six large suppliers, and are as follows:

- wholesale electricity: 26.7%

- wholesale gas: 35.9%

- networks electricity: 15.4%

- networks gas: 14.4%

- government obligations electricity: 6.7%

- government obligations gas: 1.0%.

 

  • The index reflects estimated expected annual costs, covering the 12 months from the time of each update, based on the best information available at the time. So, for example, the value of the index for May 2018 will reflect estimated costs for the period 1 May 2018 to 30 April 2019, expressed relative to estimated expected annual costs as of the base period (1 January 2015 to 31 December 2015).
  • The estimates in the index are forward-looking, they therefore rely on forecasts and assumptions, and so will be subject to uncertainty. Information on suppliers’ realised costs is available in the financial statements published by the six large energy suppliers. See Understanding the profits of the large energy suppliers.
  • The index does not include estimates of suppliers' ‘back-office’ operating costs (such as the costs of billing or metering – including the costs of the smart meter rollout) or their profit margins, which suppliers will seek to cover when setting their prices.
  • The index is based on trends in the average prices of wholesale gas and electricity forward contracts in the month prior to the update. Suppliers will take different approaches to purchasing their wholesale energy, and many will buy their energy over an extended period. The index does not seek to estimate any impact this may have on a supplier’s costs.
  • Other elements of costs are also likely to vary across individual suppliers. For example, suppliers may have some flexibility in how they meet their obligations under government programmes. This could mean, for example, that suppliers see different year-on-year changes in costs than indicated by the index where they have chosen to meet their obligations under the ECO scheme at the start of the delivery period (the forecasts used in the index are based on a flat delivery profile). Network charges will also vary between suppliers depending on things like the regional profile of their customer base. 
  • The index is calculated for a customer with typical consumption. We have held consumption fixed over time to increase comparability with trends in suppliers’ prices (which are also typically expressed for a given level of consumption). In practice, energy use will vary from one year to the next, depending on temperatures. Energy use is also subject to long-run trends, for example as a result of increasing energy efficiency. Trends in consumption will also have a significant impact on the size of customers’ bills.
  • Capacity market payments were included in the index from winter 2017, we have categorised these as wholesale electricity costs. We consider that this allocation best reflects the nature of these costs. We intend to keep under review what further detail might be provided on the costs associated with different government programmes. 
  • Since the August 2017 update, we have included the additional costs associated with the expected exemption of Energy Intensive Industries from the costs of the Renewable Obligation scheme, following the Government’s announcement in December 2017. The Government’s decision on implementing the same exemption for the Feed-in Tariff scheme has yet to be published, and so the possible impact of a similar change to the way this programme is funded is not currently included.

Further details of how we calculate the index are provided in our methodology document.

Further information

This chart is part of our quarterly update to the Supplier Cost Index. For further details, see Understanding the profits of the large energy suppliers.

 

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Javascript is required to render chart Breakdown of the default tariff price cap (GBP £).

Source: Ofgem.

Information correct as of: 7 February 2019

This chart shows a breakdown of the costs that make up the default tariff price cap for a dual-fuel, direct debit customer with typical consumption. It helps to explain the relationship between the level of the cap we set, and the different cost factors that influence it each time we update it.

The default tariff cap is effective from 1 January 2019. It has different levels set to reflect how you pay, where you live and the type of energy meter you have. For a detailed breakdown of the set cap prices by payment method, meter type and region, please see our industry page. Customers should contact their supplier for details specific to their tariff. 

The default tariff price cap limits how much a supplier can charge customers on default tariffs, including standard variable tariffs, per unit of energy. It doesn’t cap the total cost of a bill. That’s because the amount customers pay also depends on how much gas or electricity they’ve used. Suppliers can charge less than the set level of the cap, but not more. 

We update this chart every six months in February and August, to reflect the levels of the cap that will come into effect in April and October.

Click the ‘more information’ tab above for a summary of the latest trends, details of how to interpret the component costs and allowances, and for information on our methodology.

Policy Areas:

  • Domestic consumers
  • Electricity - retail markets
  • Gas - retail markets

Data Table

Breakdown of the default tariff price cap (GBP £)
Wholesale costsNetwork costsPolicy costsOperating costsEarnings Before Interest & Taxes (EBIT)VATPayment method uplift allowanceHeadroom allowance
2018/19 winter44725813719820541212
2019 summer52127015120422601213

More information

At-a-glance summary

  • The level of the tariff cap is based on the underlying costs required to supply energy. It applies from 1 January 2019.
  • We publish the level of the price cap in February and August to apply on 1 April and 1 October respectively each year.
  • The tariff level will reflect changes in the costs to supply energy. We determine how much each independent component of the cap should change by looking at external cost data. Details of the latest update can be found at Default tariff cap: 1 April 2019 to 30 September 2019.

Relevance and further information

This chart summarises the different costs that make up the default tariff price cap.

We update the level of the cap every six months, either reflecting changes in underlying costs, or increases in inflation. Our calculations cover:

  • wholesale energy costs: how much a supplier has to pay to get the gas and electricity to supply households with energy (we base this on forward prices for energy to be delivered over a 12-month period)
  • network costs: the regional costs of building, maintaining and operating the pipes and wires that carry energy across the country to households
  • policy costs: the costs related to government social and environmental schemes to save energy, reduce emissions and encourage take-up of renewable energy
  • operating costs: the costs incurred by suppliers to deliver billing and metering services, including smart metering
  • payment method uplift allowance: the additional costs incurred by suppliers to bill customers with different payment methods
  • headroom allowance: this allows suppliers to manage uncertainty in their costs, and also offer competitive deals beneath the set level of the cap.
  • Earnings Before Interest and Taxes (EBIT): a fair rate of return allowed for suppliers, to ensure they can finance their businesses.
  • VAT: 5% tax added to the level of the tariff.

Methodology

  • The level of the cap is based on calculations of the costs required for an efficient supplier to provide energy. It also includes some additional allowances to manage uncertainty, and ensure suppliers can finance their activities, amongst other things.
  • We calculate the bill values associated with the different tariff types using a ‘typical domestic consumer’ with ‘medium’ energy use. At October 2018, typical consumption values for a medium consumer are 12,000kWh/year for gas and 3,100kWh/year for electricity (profile class 1). Find out more at Typical domestic consumption values.
  • All prices shown are for a dual fuel customer paying by direct debit (i.e. where a customer takes gas and electricity from the same supplier). 
  • Further details of the methodology for calculating the level of the Default Tariff can be found in our statutory consultation on the default tariff cap and decision documents.

For a detailed breakdown of the cap by meter type and region, please see our page for the latest level for 1 April to 30 September 2019.

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Javascript is required to render chart Breakdown of the prepayment price cap (GBP £).

Source: Ofgem analysis.

Information correct as of: February 2019

This chart shows a breakdown of the costs that make up the prepayment meter price cap. It helps to explain the relationship between the level of the prepayment price cap we set, and the different cost factors that influence it each time we update it. We update this chart in February and August, to reflect the levels of the prepayment price cap that will come into effect in April and October.

The prepayment price cap limits how much a supplier can charge customers on prepayment meters per unit of energy. It doesn’t cap the total cost of a bill. That’s because the amount customers pay also depends on how much gas or electricity they’ve used. Suppliers can charge less than the set level of the cap, but not more. All prices shown here are for a dual fuel customer with typical energy use.

We extended the prepayment price cap to a further one million vulnerable customers in receipt of the government’s Warm Home Discount who were on a standard variable or default energy tariff on 2 February 2018 (under the label of a ‘safeguard tariff’). These customers transferred to the broader price cap for customers on default energy tariffs when it became effective on 1 January 2019.

Click the ‘more information’ tab above for a summary of the latest trends, details of how to interpret the component costs and allowances, and for information on our methodology.

For a detailed breakdown of the cap by meter type and region, please see our page for the latest level for 1 April to 30 September 2019.

Policy Areas:

  • Electricity - retail markets
  • Gas - retail markets

Data Table

Breakdown of the prepayment price cap (GBP £)
Wholesale costsNetwork costsPolicy costsOther, indirect cost allowancePrepayment uplift allowanceHeadroom allowanceVAT
2017 summer361257125166642850
2017/18 winter352258112168652749
2018 summer378258135171662952
2018/19 winter421257134172673154
2019 summer493271144174673459

More information

At-a-glance summary

  • We update the level of the prepayment price cap on 1 April and 1 October each year. The update on 1 April 2019 will increase the set level by £106 from its previous level at 1 October 2018.
  • The rise in the tariff level reflects increases in wholesale, network, and policy costs.
  • Other categories of costs remained largely unchanged. These categories are the costs to comply with social and environmental government schemes, network costs, operating costs, costs specifically associated with prepayment meters and ‘headroom’, which is designed to allow suppliers to offer competitive deals underneath the cap.

Relevance and further information

This chart summarises the different costs that make up the prepayment meter price cap applying to customers with prepayment meters (excluding those with fully interoperable smart meters). 

The Competition and Markets Authority introduced the price protection of a price cap to prepayment meter customers, who can’t easily access the cheapest tariffs, in April 2017. These customers are often in vulnerable circumstances. They designed the tariff based on a broad estimate of how much it costs an efficient supplier to provide gas and/or electricity to certain groups of customers. 

As the energy regulator, Ofgem administers and calculates the level for the cap.

We update the level of the tariff every six months, either reflecting changes in underlying costs, or increases in inflation. Our calculations cover:

  • wholesale energy costs: how much a supplier has to pay to get the gas and electricity to supply households with energy (we base this on forward prices for energy to be delivered over a 12-month period);
  • network costs: the regional costs of building, maintaining and operating the pipes and wires that carry energy across the country to households;
  • policy costs: the costs related to government social and environmental schemes to save energy, reduce emissions and encourage take-up of renewable energy;
  • other, indirect cost allowance: this includes operating costs and is inflated by the Consumer Price Index
  • prepayment uplift allowance: the additional costs involved in supplying prepayment customers compared to credit customers, which is inflated by CPI; and
  • headroom allowance: this allows suppliers to offer competitive deals underneath the set level of the prepayment price cap, and is calculated as a proportion of other cost elements.

Methodology

  • The level of the cap is based on calculations of wholesale costs, network costs, policy costs, operating costs and costs specifically associated with prepayment meters. It also includes a degree of ‘headroom’, which is designed to allow suppliers to offer competitive deals underneath the level we set for the prepayment price cap.
  • We calculate the bill values associated with the different tariff types using a ‘typical domestic consumer’ with ‘medium’ energy use. At October 2017, typical consumption values for a medium consumer are 12,000kWh/year for gas and 3,100kWh/year for electricity (profile class 1). Find out more at Typical domestic consumption values.
  • All prices shown are for a dual fuel customer (i.e. where a customer takes gas and electricity from the same supplier). 
  • Further details of the methodology for calculating the level of the prepayment price cap can be found in the CMA Order and Explanatory Note
  • The figures presented here are calculated differently from the data on the domestic dual fuel bill breakdown over time for the large suppliers. This data is from the historical financial reporting by the large suppliers. The figures used to calculate the prepayment price cap are estimates across the whole market, and we make certain assumptions. For example, we calculate wholesale prices based on the forward prices for energy delivered over a 12-month period, but individual suppliers may differ in their purchasing strategies – some suppliers buying wholesale energy as much as two to three years in advance and some nearer the time that they launch their products.
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Javascript is required to render chart Supplier Cost Index by fuel type (GB).

Source: Ofgem analysis.

Information correct as of: May 2018

The Supplier Cost Index tracks ongoing trends in wholesale costs, network costs and the charges to suppliers associated with government programmes.

This chart is no longer being updated.

At-a-glance summary

  • In the three months (between 1 February 2018 and 1 May 2018) the index increased by 5.3%, driven primarily by increases in wholesale gas and electricity costs. There was also a small increase in the costs of government obligations related to supplying electricity.
  • Overall, the Supplier Cost Index (dual fuel) increased by 14.1% between 1 May 2017 and 1 May 2018.
  • The 12 month increase was primarily driven by increases in wholesale gas and electricity costs.
  • The index starts in January 2015. Costs fell during 2015 and early 2016, with much larger reductions for gas than electricity. By the 1 May 2018, the dual fuel index is 9.7% above its level at the start of 2015. The electricity index is 19.7% higher, while the gas index is 0.1% higher.

Click the ‘more information’ tab above for a description of how the index is calculated and which costs are included.

Policy Areas:

  • Electricity - retail markets
  • Gas - retail markets

Data Table

Supplier Cost Index by fuel type (GB)
Expected supply costs for the next 12 months (Jan-15 = 100)Dual FuelElectricityGas
Jan-15100.0100.0100.0
Feb-1592.9995.3790.72
Mar-1596.7997.9895.66
Apr-1595.3096.4294.24
May-1594.9696.5893.42
Jun-1594.0096.3291.79
Jul-1593.6596.4990.94
Aug-1592.8496.3689.48
Sep-1590.7095.4586.18
Oct-1590.5195.9185.35
Nov-1589.1095.2483.24
Dec-1586.7494.6079.26
Jan-1685.1494.0876.61
Feb-1681.8091.7972.29
Mar-1681.4792.1071.35
Apr-1682.3893.5271.76
May-1683.2694.2572.79
Jun-1685.8896.4275.84
Jul-1691.18100.8581.97
Aug-1695.48104.6186.78
Sep-1693.09103.4283.24
Oct-1692.66104.3281.56
Nov-16104.35118.8690.51
Dec-16105.01118.9991.68
Jan-1798.77108.5089.49
Feb-17102.23109.9894.85
Mar-17100.41108.0393.14
Apr-1796.68105.4388.35
May-1796.06105.0787.48
Jun-1795.61105.0586.61
Jul-1796.18106.6486.22
Aug-1796.52107.6785.89
Sep-1799.70110.6789.25
Oct-17101.64112.1291.66
Nov-17103.12112.9593.76
Dec-17105.71114.4797.37
Jan-18106.70114.6699.12
Feb-18104.13113.5495.15
Mar-18102.91112.9393.36
Apr-18105.90116.0096.28
May-18109.65119.70100.07

More information

Methodology

  • We calculate the Supplier Cost Index by estimating trends in network charges, wholesale prices and the charges to suppliers associated with government programmes (note that in some cases, these government charges only apply to large and medium-sized suppliers).
  • These estimates are then combined with information on the relative scale of each of these categories of cost to calculate the trend in the overall Supplier Cost Index. The weights given to each category of costs are based on financial statements from the six large suppliers, and are as follows:

- wholesale electricity: 26.7%

- wholesale gas: 35.9%

- networks electricity: 15.4%

- networks gas: 14.4%

- government obligations electricity: 6.7%

- government obligations gas: 1.0%.

 

  • The index reflects estimated expected annual costs, covering the 12 months from the time of each update, based on the best information available at the time. So, for example, the value of the index for May 2018 will reflect estimated costs for the period 1 May 2018 to 30 April 2019, expressed relative to estimated expected annual costs as of the base period (1 January 2015 to 31 December 2015).
  • The estimates in the index are forward-looking, they therefore rely on forecasts and assumptions, and so will be subject to uncertainty. Information on suppliers’ realised costs is available in the financial statements published by the six large energy suppliers. See Understanding the profits of the large energy suppliers.
  • The index does not include estimates of suppliers' ‘back-office’ operating costs (such as the costs of billing or metering – including the costs of the smart meter rollout) or their profit margins, which suppliers will seek to cover when setting their prices.
  • The index is based on trends in the average prices of wholesale gas and electricity forward contracts in the month prior to the update. Suppliers will take different approaches to purchasing their wholesale energy, and many will buy their energy over an extended period. The index does not seek to estimate any impact this may have on a supplier’s costs.
  • Other elements of costs are also likely to vary across individual suppliers. For example, suppliers may have some flexibility in how they meet their obligations under government programmes. This could mean, for example, that suppliers see different year-on-year changes in costs than indicated by the index where they have chosen to meet their obligations under the ECO scheme at the start of the delivery period (the forecasts used in the index are based on a flat delivery profile). Network charges will also vary between suppliers depending on things like the regional profile of their customer base. 
  • The index is calculated for a customer with typical consumption. We have held consumption fixed over time to increase comparability with trends in suppliers’ prices (which are also typically expressed for a given level of consumption). In practice, energy use will vary from one year to the next, depending on temperatures. Energy use is also subject to long-run trends, for example as a result of increasing energy efficiency. Trends in consumption will also have a significant impact on the size of customers’ bills.
  • Capacity market payments were included in the index from winter 2017, we have categorised these as wholesale electricity costs. We consider that this allocation best reflects the nature of these costs. We intend to keep under review what further detail might be provided on the costs associated with different government programmes. 
  • Since the August 2017 update, we have included the additional costs associated with the expected exemption of Energy Intensive Industries from the costs of the Renewable Obligation scheme, following the Government’s announcement in December 2017. The Government’s decision on implementing the same exemption for the Feed-in Tariff scheme has yet to be published, and so the possible impact of a similar change to the way this programme is funded is not currently included.

Further details of how we calculate the index are provided in our methodology document.

 

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