Wholesale Energy Market Update – September 2018
One of the things we take pride in at Igloo is how easy it is for our customers to manage their energy. Simplicity has always been a big part of our approach, and since day one of joining the energy market, our small company has always strived to keep things straightforward and transparent for our customers. It’s one of the main reasons people switch (and stay) with us.
Which is why we wanted to take a moment to explain the Wholesale Energy market and give you a better understanding of where the electricity and gas powering your home comes from.
So, what exactly is wholesale energy?
It’s likely you’ve heard the term Wholesale Energy already. It’s a phrase often used in the media and one (some suppliers) like to throw around a lot (usually as a ‘get out of jail free card’ to justify substantial price hikes). But it’s very seldom explained, and we think that’s wrong.
Wholesale energy accounts for around 35-40% of the average household’s fuel bill. But its price isn’t fixed. Just like the stock market the cost of wholesale energy constantly rises and falls. It’s driven by the supply and demand of things like oil & gas globally, along with when large power stations stop producing for maintenance all over Europe. As a supplier it’s up to us to keep a watchful eye on the market. Making sure we’re billing our customers fairly, and offering the most competitive tariff we possibly can in line with wholesale prices.
Gas & Electricity prices
The graph below shows the Igloo Pioneer tariff compared to wholesale electricity & gas prices. Both Gas & Electricity prices have increased again significantly recently, driven primarily by a shortage of gas supply across Europe. Because the UK generates a lot of its energy from gas fired power stations, when gas prices increase, so do electricity prices.
You might assume that energy prices rise and fall according to consumer demand. Which is true. They do. But this isn’t the only influencing factor affecting the wholesale market.
While winter does typically drive higher fuel prices, even short-term consumption changes are enough to temporarily impact daily energy prices. With market rates typically spiking during periods of peak time usage such as evenings and on weekends.
But it’s not just our own consumer behaviour that impacts on wholesale energy pricing. Infrastructure issues, along with environmental factors (like this year’s Beast From The East) also contribute to rising energy costs. And in these instances the impact can be long-term and severe, leading to increased and prolonged fuel cost rises which is what we are experiencing right now.
What’s happening in the wholesale energy market right now?
Right now the market is at the highest level it’s been for quite some time, with increasing costs for both gas and electricity. Something we’ve been monitoring closely since our last update back in July.
As of today, gas alone has increased by 24% since our last price change, while electricity costs have similarly risen 23%. Meaning suppliers across the board have been forced to increase their prices. We are now likely to have to increase our prices again, something we never enjoy having to do at Igloo.
While its far from ideal for our customers, we think its important that we try to help explain what’s been causing it and let you know as soon as we do that our prices might have to change. The Telegraph recently published an article setting out the main issues with Gas supply and the drivers of the recent price increases.
How this affects your Igloo Energy bill
Our last price change was 5.8% for an average dual fuel bill, where our electricity prices increased but we held gas prices down at the time. So we hope that goes some way to demonstrating how, even in the face of changing wholesale energy trends, we do all we can to keep costs down for our Igloo Pioneer customers.
Unfortunately, with the continued rises in wholesale costs we are now expecting to have to increase our prices again in the very near term. We are doing all we can to limit the impact and we are committed to always giving you one of the most competitive tariffs in market. We’ll publish a further update here soon.
Remember, we always make sure we alert you with 30 days notice if our prices do need to change. And we’ll never hold you in a contract or charge you any exit fees if you ever want to leave us.
(Although obviously we hope you stay).