It is sometimes difficult for business electricity users to understand why electricity prices have not significantly come down in line with the wholesale energy price. If we leave aside various press and political statements claiming profiteering by energy companies and look more closely at some of the ‘non-energy’ costs, we see that, (dependant on profile), the wholesale energy cost forms only 53% of the total paid.
For example, the red unit charge for low voltage half hourly metered electricity in the East Midlands distribution area (passed through to recover some of the Transmission and Distribution costs at peak times of between 4.00pm and 7.00pm Monday to Friday) increased by 29% in April 2014. As part of the risk management exercise when placing a half hourly electricity contract, we may stipulate an ‘all inclusive’ supplier price but projections are then made by the supplier and this will impact on the overall unit price.
For non-half hourly electricity, with a few exceptions, these pass through costs are built in to the unit pence per kilowatt price.
We have also seen steady increases in the Renewables Obligation (RO) charge, graphically represented below. By the time we add in the Feed In Tariff (FIT) charges and Climate Change Levy (CCL), the supplier is left with only 5% margin.
