Ofgem publishes latest estimates of costs and revenues for a typical large energy supplier

Publication date
28th August 2014
Information types
Policy areas

Ofgem has today published its latest monthly projection of costs and revenues for a typical large energy supplier over the coming 12 months.

As a regulator it is important that Ofgem provides these figures to make the market clearer for consumers. The supply market indicators (SMI) help them to understand the relationship between their bill and the different costs faced by these suppliers.

As part of the SMI, we include a forward looking estimate of margins. They do not represent the profits of the individual six largest suppliers as the companies still have to pay taxes and fund debt payments from the margin they make. Reporting margins in this way is common across various sectors.

The actual margins earned by any of these suppliers will depend significantly on their own particular hedging strategy, cost efficiency and particularly on actual consumption levels, which are themselves affected by weather, especially in gas.

The latest indicators show that the average dual fuel bill from August 2014 to August 2015 will be £1330. The portion of the dual fuel bill made up by suppliers’ wholesale costs is £598. This is a similar amount to wholesale costs Ofgem reported in the July update. Network, environmental and social costs make up £386 of the bill. Our estimate of supplier operating costs for the next 12 months is £174.

Our estimate of the pre-tax margin that a typical large supplier could make over the same period is £102 or 8%. This is a decrease of £4 on last month’s estimate.

View this month’s Supply Market Indicator analysis in full

Since 2009 Ofgem has required the six largest energy suppliers to produce annual statements showing actual costs, revenues and profits for their generation and supply businesses. You can view these at Energy Companies’ Consolidated Segmental Statements.

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Notes to editors

1. About Ofgem

Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority's functions are set out mainly in the Gas Act 1986, the Electricity Act 1989, the Competition Act 1998 and the Utilities Act 2000. In this note, the functions of the Authority under all the relevant Acts are, for simplicity, described as the functions of Ofgem.

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