Why are energy prices increasing when wholesale cost isn’t?

Energy price increases like to be sensationalised by the press. They usually cite the fact that wholesale prices have dropped as proof of profiteering.

Don’t get me wrong I am not one to back the energy suppliers and their price increases. However, there are other circumstances to take into account apart from their desire to increase profits.

Whats in a price?

Under fifty percent of the price you pay at home or work for your energy is the cost of the energy itself. The bulk of the cost is made up by production and distribution costs, taxes, levies, administrative charges, and margin.

Recent increases have had little to do with the wholesale price of energy. They have more to do with charges being forced upon suppliers by both power generators and the network operators. Suppliers have then passed these through to the customer.

It gets worse!

The bad news is that these increases in additional charges look set to continue with Ofgem keen to make charging structures transparent. Add to that uncertainty about future power generation and the unknown of what Brexit may bring and the UK energy market looks to remain as confusing as ever.

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