*Source: Ofgem: Energy bills are rising – and what you can do about it article

Gas prices: 

At-a-Glance Summary

Forward gas prices have risen steeply over the last 5 months. GB and European gas storage levels are at historically low levels and will need to be filled over the rest of the summer and beyond to meet Winter '22 demand. This was compounded by protracted cold temperatures. Unlike in previous years flexible LNG has been going to Asian gas hubs because they have been trading above European ones. A reduction in European pipeline deliveries year on year has also pushed up prices.

Methodology

The contracts used to create this graph are an average of specific quarterly and seasonal forward contracts. For example:

• For contracts traded between 01 February and 31 July ’21 we will use contracts for delivery Quarter 4 ‘21, Quarter 1 ’22, Quarter 2 ’22, Quarter 3 ’22, Winter ‘21 and Summer ‘22

• For contracts traded between 01 August ’21 and 31 January ’22 we will use contracts for delivery Quarter 2 ‘22, Quarter 3 ’22, Quarter 4 ’22, Quarter 1 ’23, Summer ’22 and Winter ’22.

• These are the reference contract delivery periods used in the price cap methodology. See for more details on the Price Cap Methodology.

All transactions for each contract type, for each week are averaged on a volume-weighted basis. These are then averaged to arrive at a single data point for each week.

Where a particular contract is not traded within a given week, it is excluded from the data point average.

Each data point represents a weeks’ worth of data. For example, the 26/04/2021 data point covers all transactions for the week of Monday 26/04/2021 to Friday 30/04/2021 inclusive.

The data used to produce these charts is obtained by Ofgem directly from brokers. In contrast the underlying data for the Price Cap wholesale cost assessment is provided by a third-party Price Reporting Agency.

Electricity Prices: 

At-a-Glance Summary

Electricity prices are heavily impacted by rising gas prices because of the importance of gas-fired power stations as the marginal unit to meet demand.  This is the most significant driver of the increase in wholesale electricity prices. Forward electricity prices are also influenced by the cost of carbon allowances, which generators buy in the UK ETS (previously under EU ETS before May 2021). These allowances have also increased significantly in 2021. Carbon prices add to the cost of electricity prices because it is a marginal cost for non-renewable generation which must buy carbon allowances to offset their carbon emissions.

Methodology

The contracts used to create this graph are an average of specific baseload and peakload seasonal forward contracts. For example:

• For contracts traded between 01 February and 31 July ’21 we will use contracts for delivery winter season ‘21/22 and summer ’22.

• For contracts traded between 01 August and 31 January ’22 we will use contracts for delivery summer season ‘22 and winter season ‘22/23.

• These are the reference contracts used in the price cap methodology. Link to the Price Cap Decision Overview.

All transactions for each contract type, for each week are averaged on a volume-weighted basis. These are then averaged to arrive at a single data point for each week.

Where a particular contract is not traded within a given week, it is excluded from the data point average.

Each data point represents a weeks’ worth of data. For example, the 26/04/2021 data point covers all transactions for the week of Monday 26/04/2021 to Friday 30/04/2021 inclusive.