Electricity and Gas Supply Market Indicators - 25/09/2013
Reports, plans and updates
- Publication date
- Industry sector
- Supply and Retail Market
We designed the Supply Market Indicators (SMI) to make the energy market clearer by showing trends in costs suppliers face and the bills they charge.
The SMI shows an up-to-date estimate of:
- the annual bill for an average dual fuel customer on a standard tariff, and
- the annual costs per customer a representative supplier incurs for delivering the electricity and gas.
The SMI also provides an indicative annual net margin, which is the difference between the customers' retail bills and the suppliers' costs. This is presented as a ‘snapshot’ margin for the year ahead and as a rolling average that smoothes fluctuations in the ‘snapshot’ margin. The latter approach better illustrates trends over time. The current values are:
- Snapshot net margin: £65
- Rolling average net margin: £65
The SMI does not seek to provide estimates of companies’ profits, either collectively or individually. Detailed information on individual companies’ revenues, costs and profits in both their generation and supply arms is available on a backward-looking basis in their Consolidated Segmental Statements. Ofgem requires the large vertically integrated companies to produce these annually, based on audited figures. The 2012 Statements can be found here. [Link: 2012 Consolidated Segmental Statements (pdf)]
The SMI estimates are based on publicly available and verifiable data, where possible. We make proportionate and periodic adjustments to the data when the available evidence warrants it. We will consider including in the SMI any robust evidence stakeholders send us. For more detail, please see the SMI methodology. [Link: Methodology for the Supply Market Indicators]
Contact the team: smi@ofgem.gov.uk
Updating the estimates we use for energy consumption
To calculate the SMI we use estimates of how much energy an average domestic consumer uses. Since January 2010 these have been set at 16,900 kilowatt hours (kWh) per year for gas and 4,000 kWh per year for electricity.
As of 13 September we are lowering these estimates by 9 per cent for gas and 5 per cent in electricity. This is because data published by the Department for Energy and Climate Change this year shows a sustained fall in consumption in recent years, especially household gas use.
The Office for National Statistics also recently highlighted this trend. Further information on their findings is available here.
Using lower consumption values affects our estimate of suppliers’ costs, revenues and, hence, margins. In general, the less energy a customer uses, the lower the margin a supplier earns on such customers (and vice versa).
To reflect the impact of lower consumption over time we are updating our SMI estimates for the last two years. Going further back, the Consolidated Segmental Statements provide information on the actual costs, revenues and margins of the Big Six suppliers- back to 2009.
The impact of these changes to consumption assumptions on our estimates of suppliers’ forward looking margins and on average customer bills is illustrated in the graphs and tables in the PDF below.