We last updated you in December, when we reported that wholesale costs had begun to settle down. Around that time, we simplified our statements by removing the dual fuel discount and lowering our standing charge. We said then that if there’s an opportunity to lower the Bulb tariff further, we’d get on and do it. Happily, the cost of supplying gas has continued to come down and we’re now able to drop our gas rates. Due to increased network and policy costs for electricity, we aren’t able to drop our electricity rates at the same time. Thanks to lower gas rates, the average home will save £20 a year on their annual energy bill.
The cost of supplying gas has fallen
Wholesale gas costs have continued to fall and are now 12% lower than they were in December. At Bulb, we drop our prices as soon as we can save the average member £20 on their annual bill. Happily, the continued falls in the wholesale cost of gas have made that possible. We’re lowering our gas unit rates, saving the average home £20 per year. The annual bill for an average home on Bulb is now £1,000 per year.
As you can see in the chart, the gap between the cost of Bulb’s annual energy bill and the wholesale cost of energy has increased. Multiple costs which impact energy bills are moving at the moment. Network and policy costs, which impact the cost to supply energy, have increased significantly in this time. This has reduced the overall price decrease we’re able to pass on to our members.
Passing savings quickly on to our members is part of our Fair Price Principles and we intend to keep our promise. In fact, this is our ninth price drop since we started Bulb, and our second this winter. We’ll drop our prices again if the cost to supply energy falls further.
What caused energy costs to decrease?
Wholesale gas costs are 12% lower than they were in December
Mild weather in Europe and China meant gas storage levels remained healthy throughout the winter, pushing gas costs down
Wholesale electricity costs are 12% lower than they were in December, but network and policy costs have increased, pushing electricity costs up
Wholesale gas costs have dropped by around 12% since December.
We started 2019 with healthy gas storage levels. This trend continues and levels are now 31% higher than they were at the same point last year. Global weather patterns have had a big hand to play in this. Mild weather in China over the past couple of months has meant demand for Liquified Natural Gas (LNG) isn’t as high as it was last year.
As a result, lots of additional LNG cargoes which would typically head East, came to Europe instead.
In Europe, we’ve experienced milder than usual weather throughout the winter. This week, we had the warmest February day on record. While weather this warm in February doesn’t feel quite right, it has meant we haven’t needed to use as much gas as we typically use this time of year.
Wholesale electricity costs are now around 12% lower than they were in December. This is driven by the change in gas prices. The UK is still heavily dependent on gas-fired power plants for electricity generation. So, lower wholesale gas costs mean lower wholesale electricity costs too.
However, network and policy costs are increasing from 1st April, pushing the cost to supply electricity up. Across the board, the cost of supplying electricity through the grid has increased. These costs are charged by electricity distributors including the National Grid. In some areas, these increases are steep. For example, they are up 11% in Merseyside (Liverpool) and North Wales.
At the same time, electricity policy costs are increasing by 4%. These costs go towards initiatives including the Renewables Obligation (RO) and Contracts for Difference (CFDs), which help to build new renewable generation, as well as the national smart meter infrastructure (known as the DCC). While we wholeheartedly support these endeavours, they do increase the cost of supplying electricity for suppliers.
The combination of increased network and policy costs for electricity means that despite the fall in wholesale costs, we aren’t able to pass a saving on our electricity unit rates on to our members.
How does this affect your bill?
At Bulb, the price you pay for energy reflects the true cost of supplying energy.
The average home will save £20 on their annual energy bill as a result of falling wholesale gas costs. The change in our gas rates will come into effect automatically from 21st March.
Some members don’t use gas in their homes. As we only provide electricity to these members, they won’t take advantage of our lower gas prices. There’ll be no change to their annual bill.
In some areas, the cost of supplying gas through the grid has increased significantly. This increase is so significant that we aren’t able to pass the saving in the wholesale cost of gas on to those members. As a result, there’ll be no change to the annual bill of members living in Merseyside and North Wales. There’s no need for members to check the map to see what region you’re in. We’ll email all our members to explain how it affects them.
Why do wholesale prices affect Bulb?
We always buy 100% renewable electricity and 10% green gas. However, renewable generators will sell to whoever is prepared to pay for their energy (and rightly so!). This means that when fossil fuel prices go up, renewable prices go up too.