Supply Market Indicators
In our regular monthly review of Ofgem’s Supply Market Indicators we focus on November’s release from the energy regulator.
Last month’s figures are in brackets.
November 2014
The November 2014 SMI from Ofgem reported that:
– They estimate that the average annual dual fuel bill has once again fallen slightly for the next 12 months to £1,326 (£1,328)
– Gas bills will fall to £739 (£741) per annum on average whilst electricity bills will be lower at £608 (£609)
– That wholesale prices have fallen since the start of 2014 with the gas price 18% lower and the electricity price 7% lower
– That wholesale prices will make up just 44% (45%) at £588 (£591) of the average dual fuel bill
– The equivalent figure 12 months ago for the contribution of wholesale prices to average dual fuel bill was £633 over 51% illustrating the decreasing influence the cost of energy is having on the bills we pay
– In contrast, Ofgem have revealed that once again network costs will rise to £305 (£302) of the average bill over the next 12 months equivalent to 23% of total cost
– That environmental and social obligation costs have again increased this time to £91 (£90) or 7% to the average customer bill
– That supplier operating costs will remain at a forecast level of £175 or 13% of the average dual fuel bill
– That Supplier pre-tax margins (profit) will be higher at £105 (£103) or 8% of an annual duel fuel bill over the coming 12 months.
The headlines from the November SMI therefore are:
– Wholesale energy costs DOWN
– Network costs UP
– Environmental and Social costs UP
– Supplier costs LEVEL
– Supplier profit UP
Ofgem’s SMI 2009-2014
Ofgem’s SMI has been reporting since 2009 and the comparative annual results are detailed in the table below.
Unfortunately, prior to 2013 Ofgem failed to separate Network costs and Environmental & social obligation costs despite these being two of the largest and fastest growing areas of expense. However it is possible to see that the increase in the growth of the catch all segment Other direct costs from £318 in 2009 to £403 today.
In contrast, wholesale energy costs have actually fallen over the period however as one would expect this hasn’t been a linear progression and instead has been subject to peaks and troughs.
Supplier operating costs jumped between 2009 and 2010 and maintained their levels through subsequent years only to be subject to a recent jump again in 2014 to £168.
The biggest variance however is reserved for Ofgem’s assumption of supplier profit which according to their calculations has grown from £48 in 2013 to £105 today and up from just £10 in 2009. Suppliers contest this but it is easy to see why Ofgem maintain that it is suppliers keeping costs high for consumers.
| 2009 | 2010 | 2011 | 2012 | 2013 | 2014 (Nov) | £/customer/year |
| £1,312 | £1,277 | £1,150 | £1,300 | £1,316 | £1,326 | Average revenue |
| £774 | £673 | £585 | £646 | £643 | £588 | Wholesale costs |
| £318 | £329 | £320 | £373 | £394 | Other direct costs | |
| £305 | Network costs | |||||
| £91 | Environmental & social obligation costs | |||||
| £7 | Depreciation & amortisation | |||||
| £148 | £174 | £159 | £162 | £168 | £168 | Supplier operating costs |
| £10 | £41 | £32 | £56 | £49 | £105 | Operating profit |
| £62 | £61 | £55 | £62 | £63 | £63 | VAT |