WIREDGOV

Ofgem has published its latest monthly estimate of costs and revenues for a typical large energy supplier over the coming 12 months 

We provide these estimates to make the energy market clearer for consumers. We look at how the individual cost components of an average dual fuel bill are expected to change over the next 12 months. Our goal is to make the relationship between the costs faced by energy suppliers and consumer bills for domestic energy more transparent and accessible.

As part of the SMI, we include a forward looking estimate of margins. This is not the same as the profits of the individual six largest suppliers. The actual pre-tax profit earned by any of these suppliers will depend on a variety of factors. These include a supplier’s chosen hedging strategy, cost efficiency and actual consumption levels, which are themselves affected by weather, especially in gas. Suppliers also still have to pay taxes and fund debt payments from the margin they make. Reporting margins in this way is common across various sectors.

The latest indicators show a similar picture to the August update. Our estimate of the average dual fuel bill from September 2014 to August 2015 is £1329, compared with £1330 in August. Our estimate of the portion of the dual fuel bill made up by suppliers’ wholesale costs for the next 12 months is £594 compared with £598 in August. Network, environmental and social costs estimates now make up £387 of the bill compared with £386 of the bill in August. Our estimate of supplier operating costs for the next 12 months is £174.

Our estimate of the pre-tax margin that a typical large supplier could make over the same period is £102 or 8%. This is the same as for the August estimate. View this month’s analysis in full here:

View this month’s Supply Market Indicator analysis in full

Since 2009 Ofgem has required the six largest energy suppliers to produce annual statements showing actual costs, revenues and profits for their generation and supply businesses. You can view these at Energy Companies’ Consolidated Segmental Statements.

In October we will publish a summary of the 2013 statements.

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Notes to editors

About Ofgem

Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority's functions are set out mainly in the Gas Act 1986, the Electricity Act 1989, the Competition Act 1998 and the Utilities Act 2000. In this note, the functions of the Authority under all the relevant Acts are, for simplicity, described as the functions of Ofgem.

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