Confusing jargon masks reality of energy pricingEnergy wholesale costs not simple, says Which?

27 February 2010

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The link between wholesale energy prices and the cost of our gas and electricity bills is more complicated than energy suppliers would have us believe, according to an investigation by energy experts for Which?

In the past five years, gas and electricity prices have soared by 107% and 66% respectively, largely as a result of 'market forces' that are out of energy suppliers' control – or so we’re told.

Wholesale energy prices

But Which? experts say it’s not simply a case of wholesale prices - the price energy companies pay for the energy they sell to us - going up and energy bills following suit.

Instead, energy suppliers get their energy in a variety of ways. Contracts with energy generators can range from months to several years, and energy is also bought 'on the spot' and delivered immediately. The dominant big six suppliers - British Gas, EDF, Eon, Npower, Scottish Power and Scottish & Southern - also generate some of the energy that they sell to consumers.

Energy suppliers should be open

More than 80% of Which? members want energy suppliers to be open about how their bills are made up, especially the link between what consumers pay and what energy suppliers pay for the gas and electricity they sell to us.

But almost 90% also think it’s hard to work out if price changes are a fair reflection of the actual cost of energy – thanks to confusing jargon such as 'volatile markets', 'increased market commodity costs', 'continued increases to input costs', and 'the soaring cost of raw materials'.

Fair price for energy

The Liberal Democrats recently weighed into the energy prices debate. Shadow energy and climate change secretary, Simon Hughes MP, called for energy bills to reflect fuel costs to ensure that 'consumers are not ripped off again and again'.

Which? policy adviser Dr Fiona Cochrane said: 'The low levels of trust and satisfaction shown by our survey of energy companies mean it's important for us to have confidence that what energy suppliers ask us to pay is fair.'

Lower your gas and electricity bills

You can compare energy prices and switch to a new gas and electricity supplier on Which? Switch. People who switched with us between 1 October and 31 December 2013 are predicted to save an average of £234 a year on their bills.

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