How are my prices put together?

Your electricity prices are made up of two elements:

  1. The cost of the electricity purchased on the wholesale market
    As part of the Framework Agreement, Crown Commercial Service purchases the electricity your organisation will use in the wholesale power market. This fixes the cost of your electricity.
     
  2. Non-energy costs, such as those that cover delivering electricity to your buildings and the cost of environmental levies and other taxes​.
    EDF calculates all the non-energy costs and combines this with your energy consumption to build the prices you see on your bill. Non-energy costs are the charges applied to cover the delivery and transmission of your electricity and future generation, and can make up over 60% of your energy bill. You can learn more about non-energy costs on our NEC page.

 

The day to day price of electricity on the UK’s wholesale markets driven by the cost of producing electricity and confidence that supply can meet demand. 
 

The cost of production

Generators need to sell the electricity they produce at a price that covers their operating costs. Different generators have different costs. So, the changing mix of generation sources (gas, coal, nuclear, wind, solar etc) that make up the UK’s electricity supply greatly influences the prevailing wholesale market rate. Fuel costs are a far higher share of operating costs for power stations that burn coal and gas than for nuclear or renewable generators. That’s why the price of coal and gas has a direct influence on the cost of electricity. The cost of these fuels is in turn influenced by other markets such as oil (to which gas is directly linked) and foreign exchange rates as the UK imports a good deal of the gas and coal it needs. 

Supply and demand

As with many commodity markets, wholesale electricity prices tend to fall when supply easily meets demand. However, the margin between supply and demand is getting tighter as old power stations close. So, wholesale prices can shoot up when demand for electricity rises, for instance during economic growth, cold spells in winter or heat spells in summer and squeezes the margin of available supply. 

 

CCS Weekly Market Report

Every week, the CCS Trading Team put together a blog to explain the factors influencing the Wholesale Energy market, and what they're looking out for.

Learn more about the factors influencing Wholesale energy costs

Here’s EDF's Energy Trader James Chaplin giving you a quick run through of the factors that influence the wholesale price of energy - what they are, how they work and what to look out for.

 


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Learn more about Non-Energy Costs (NECs)
and how they impact your bill.
 

Find out more