Monitoring trends in suppliers’ expected costs - decision


Publication date

Industry sector

Supply and Retail Market

Our market monitoring and consumer research forms a crucial part of our role as the regulator of the gas and electricity markets in Great Britain. One area that we prioritise in our monitoring work is tracking the different costs that make up consumers’ energy bills. Energy prices often move significantly from one year to the next, and although prices have fallen over the past two years, rising bills over the longer term have caused concern for consumers. It is important that stakeholders can understand what is driving these trends.

To improve transparency around what is driving how much consumers pay for their energy, we publish regular information on trends in suppliers’ costs. Historically, this has comprised both analysis of suppliers’ historic costs as reported in their financial statements, and estimates of trends in expected costs over the coming year published as part of our Supply Market Indicator (SMI).

In May 2015 we temporarily suspended our monthly SMI publication to carry out a review of our approach. As part of this, in August 2016 we consulted on how we should replace the SMI – and what information we should publish to help increase transparency around what’s behind movements in retail energy prices.

Following that consultation, we have decided to launch a new Supplier Cost Index. In the letter below, we describe our decision to launch the new indicator. Also provided is our presentation used at our launch event to help introduce the new index, and what the first update (for January 2017) shows.