Why is it reported that energy bills are to increase when wholesale prices have been low for months?

[Cherry42]

I’ve been on a tracker tariff since the start of the year and both electricity and gas have been consistently and significantly cheaper than the current price cap.

I saw it reported in the news today that the energy companies are reporting that the bills are going to go up.

I can’t work out why that may be? They buy the energy in advance and energy costs over the last six months have been cheap.

Is it all just another fiddle?

The algorithm for setting the price cap price is well documented.

Prices vary according to supply and demand and demand over the the past six months and hence price will have been low as it's mostly been warmer.

However, wholesale prices are subject to large spikes during winter and if you were on the tracker tariff then, you could be paying 10x more than the price cap rate for your gas. It wouldn't take many days of high prices coinciding with a cold snap and hence high usage, to wipe a lot of the savings you've made over the summer when your gas use has been much lower.

I think the fact I’m on a tracker tariff has confused the meaning of my OP. I understand how the tracker works. That’s not my question… I’m talking about the non-tracker rates from autumn onwards.

The media are reporting that fixed rates are going to go up and that average bills will go up. Why is this when the actual cost of energy over the last six months has been so low? The energy companies buy energy in advance. Fixed rates should be coming down?

Are there other factors, apart from the cost of gas/oil etc which affect the cap price?

The levies for green energy, the cost of bailing out the failed suppliers and infrastructure are three that I could come up with off the top of my head.

There may be others.

Yes they should be but the Tories will not change the way Ofgem set pricing, stupid really because it means they wont meet their inflation target but profits for the industry matter more.

Did you notice that Ofgem kept the price cap high for longer so companies could recoup what they lost in previous years?

Who is paying for all of that?

What other private sector business is cushioned from market forces like this.

Well last winter, when the prices were high, the energy companies explicitly said it was because they bought energy X months previously when prices were high. So that would imply there are no other factors.