Welcome to the Summer installment of Bulb’s Energy Price Watch, where we update you on what is going on in the wholesale energy market and how this affects your energy bill. Wholesale energy costs typically make up around 40% of your bill, so it’s important we keep you up to date on what’s going on. We do these updates every three months.
We last updated you in June, when we raised our prices as a result of increasing wholesale energy costs. In line with our Price Principles, we kept this increase as low as possible. Sadly, wholesale costs have gone up since June. They are now around 5% higher than they were. Without substantial falls in wholesale costs, there is a chance we’ll need to raise our prices in November. If we do, we’ll give our members 60 days notice. We don't charge exit fees, so our members can leave at any time at zero cost.
Wholesale costs are going up
Wholesale electricity and gas costs are 5% higher than they were in June
Despite low gas use, demand to put gas into storage for winter remains high, keeping gas prices high
Hot weather has affected nuclear and wind generators across Europe, pushing electricity prices up
There’s a chance we may have to increase prices this November. If we do, we’ll give our members 60 days notice
Wholesale gas prices are now 5% higher than they were in June.
You may have seen some things in the news about high gas prices. Ofgem, the energy regulator, has been forced to increase the level of the safeguard tariff, which protects vulnerable households from being overcharged, due to these higher gas prices.
This is a good indication of the challenging wholesale environment suppliers need to work with at the moment. But at Bulb, our tariff is hundreds of pounds cheaper than the maximum price for energy set by Ofgem and this won’t change.
This can seem strange given the hot weather we’ve been experiencing. However, there is still high demand to put gas into storage for winter, especially in Europe. This means that despite being at the lowest demand period of the year for gas, prices have remained high. Shipments of Liquified Natural Gas (LNG) to Europe have fallen over the past couple months as a result of hot weather in Asia increasing the air conditioning demand there. The UK has been exporting gas to Europe to fill the storage facilities. While storage levels continue to catch up to where they were at this point last year, prices remain high the in the meantime. We expect gas prices to stabilise in October when storage facilities are full.
Wholesale electricity prices are also around 5% higher than they were in June. This is largely driven by the change in gas price. The UK is still heavily dependent on gas-fired power plants for electricity generation, with about 40% coming from this source. So, higher gas prices mean higher electricity prices too.
On top of this, the scorching weather has affected the output from nuclear facilities across Europe. River levels are low, which means there is less water from rivers to cool nuclear plants. The water we do have is warmer so less effective. This is a particular problem in France, where more than 70% of power generation in the country comes from nuclear plants. As France exports most of its energy to its neighbours, reductions in output push prices up across the continent. Low wind generation isn’t helping either. The hot weather has been caused by higher-pressure weather systems, which are much less windy and rainy than low pressure, which is what the UK is accustomed to. This has left turbines at a near standstill.
How does this affect your bill?
Wholesale gas and electricity continue to remain high. At Bulb, the price you pay for energy reflects the cost so there is a chance we’ll have to raise our prices another time this year. As part of our Price Principles, we’re always slow to increase our prices. True to this, we’ll hold off as long as we can. But if things don’t move, we may be forced to increase our prices in line with the wholesale market.
If we do have to increase our prices, we’ll always give members 60 days notice. And we don't do exit fees, so members can leave us at any time with zero cost. We’ll be back in three months time with another Energy Price Watch update.
Why do wholesale energy prices affect Bulb?
While we only ever buy 100% renewable electricity and 10% green gas, there is only one price for gas or electricity in the UK. There aren’t separate markets for green and non-green energy sources. The price is determined by what people will pay for energy at a particular time, regardless of the source. So, when the cost of electricity produced by burning gas goes up, so does the cost of electricity from wind, solar and all other green sources.