Are wholesale costs really to blame for the rise in energy prices?

A conflict has developed between the “big six” energy companies and energy regulator Ofgem regarding who and what to blame for the price hikes.

Ofgem has released statistics that doubt the claims, suppliers have made as to why there was a price hike. The energy suppliers claim that due to the costs of bulk buying on the wholesale market and other charges, they have risen, however, Ofgem say different.

The energy bosses have been summoned to Parliament today to explain their reasons why energy prices have risen so much.

There have been four of the “big six” to raise their prices so far; npower, British Gas, SSE and Scottish Power. The latest to up their prices, Scottish Power is the only one who has released a figure outlining a 7% increase in wholesale costs.

The figures that Ofgem unveiled show how wholesale costs have remained similar, just with an average rise of 1.7%, equivalent to £10 between October 2012 and October 2013. In defense, the energy suppliers are suggesting that the methodology Ofgem are using can’t really be reliable, as the energy regulator does not know the energy suppliers’ buying strategy.

Using Supply Market Indicators, Ofgem can see most recent estimates of an annual dual fuel energy bill for an average standard tariff customer and also each customer’s costs per year in order for the supplier to deliver the gas and electricity.

In the last decade wholesale electricity and gas costs have risen by approximately 140% and 240% and environmental and social costs have risen by 10% to £100.

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