Many families will receive a letter informing them that their gas and electricity bills will increase in April. But why do utility bills keep going up at a time when wholesale prices are down?
In fact, wholesale gas and electricity prices have been falling steadily since December 2022, but this drop does not seem to have been reflected in electricity bills. The maximum price, set by regulator Ofgem, which sets electricity bills for over 80% of UK households, is £3,280 a year from 1 April.
Like many others, I received a letter from my E.ON provider this month telling me that my account has been going up since April. My electricity went from 33,966p per unit to 33,282p, so it actually went down. But my recurring charge jumped from 49,168 pence to 53,826 pence.
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My petrol stayed the same, but my permanent charge went from 28,484 pence to 29,112 pence. Energy companies seem quick to pass along rising gas prices to consumers, but less eager to cut bills when wholesale costs fall. The last time wholesale energy prices were as low as they are now was in September 2021, when the price peaked at £1,277 a year, £2,000 less than in April this year.
I asked E.ON why my bills decreased for each unit of energy and how the company could justify the increase in fixed tariffs. Its response was rather vague, stating that “during the energy crisis, caused by rising world energy prices, Ofgem played a leading role in setting the energy price cap for standard tariffs in all fields”.
An E.ON spokesperson added: “We are all very aware of the crisis in the global energy markets and its continued impact on customer bills. Following Ofgem’s price cap review, the government has announced that the guaranteed energy price will remain at £2,500 until the end of June to help reduce the cost of living. We know these are incredibly difficult times and we encourage any customers to try to reach out as we can help.”
That doesn’t explain why things keep going up. Here’s how the wholesale price of energy affects the bills consumers pay and everything else you need to know about how these costs are calculated:
What are the wholesale prices for gas and electricity?
Power companies buy the electricity they sell to consumers from the companies that produce it. The price at which they buy is known as the wholesale price for gas and electricity. UK wholesale gas prices are now around 137 pence per term, a unit of heat, compared with a peak of 590 pence per term in August 2022. Meanwhile, wholesale electricity prices have fallen from 511 pence per megawatt hour in August 2022 to just 145 pence today.
Why do wholesale energy prices go up and down?
Supply and demand affect the wholesale price of energy as well as the source of energy. For example, the UK gets around 40-50% of its gas from the North Sea and has to import the rest, leaving us exposed to large swings in gas prices in Europe. Other factors include the amount of UK gas stored, weather conditions and the strength of the pound.
If wholesale power goes down, will my bill go down?
Although electricity bills are based on wholesale prices, they are not real-time. This is because the wholesale cost of energy fluctuates wildly. To avoid this, energy companies “protect” by buying gas and electricity before they are needed. They may do this months, or even years, before they really need it.
This means that our current monthly bills do not reflect today’s prices, but rather the wholesale cost from when the supplier first paid for the energy. Therefore, it may be some time before low wholesale prices reduce electricity bills. There are several different ways to track wholesale costs, including current price and next season, all of which need to be reduced to affect your energy bills.
Ofgem chief executive Jonathan Brearley said the reduction in Ofgem’s price cap from April “reflects a fundamental change in the wholesale cost of energy for the first time since the start of the gas crisis and, although this has not an immediate impact on consumers, it’s a sign that some of the enormous pressure we’ve seen in energy markets over the past 18 months may start to ease.”
He added: “However, prices are unlikely to fall to the levels we saw before the energy crisis. Even with the government’s extensive support package now in place, this is a very difficult time for many families in Britain.”
Other factors that affect the electricity bill
Millions of variable rate customers will see their daily electricity and gas bills increase whether or not they use electricity, with some paying up to 80% more when it takes effect in the spring. Customers, like me, understand that the price of energy changes. But the delivery system remains the same, so it’s hard to see how companies can justify the continued rate hike. On social media, customers across a wide range of providers reported increases of around 20p a day, or £73 a year.
A flat charge is a daily charge for gas and electricity customers that is added to your bill regardless of how much energy you use. Ofgem does not set a limit for this part of your invoice; it is up to providers to discriminate unit and fixed prices below the general threshold.
However, it makes assumptions about how this will be done, and amazingly, it posts average fixed costs on its website. This means that from 1st April direct debit customers will normally pay 45p a day to their electricity supplier (vs 25p a day now) and 27p a day for gas (vs 26p a day now). These increases add £76.65 a year to the average bill. Ofgem also suggests that the highest current rates are paid by those with a prepaid meter or those who pay their bills with cash and cheques.
Research by National Energy Action (NEA) showed that, for a typical customer, ongoing payments have increased by two-thirds since Ofgem’s price cap was introduced in 2019. Adam Scorer, chief executive of the poverty charity NEA’s energy company, said that fixed load had been rising for “years”. He added: “Despite the UK government’s recent commitment to freeze the energy price guarantee (EPG) level from 1 April, permanent charges are expected to reach record levels. The regulator controls how costs are passed on to consumers. We know that low-income households have the most to lose from your constant default approach. It’s time to change.”
Finally, there are unique factors that explain why bills can be higher. While the UK government has confirmed it will keep the £2,500 guarantee for a further three months, customers will forfeit the £400 discount on their government bill, which expires at the end of March, as households will run out of bills from October.
MoneySavingExpert Martin Lewis explained in March how this would affect bills, saying: “So in practice you will pay more, but not as much as you were paying. And especially for those using less, where £66 was a disproportionate increase. Because if you are a small user, it had a greater effect. He will feel a great loss when he arrives in April.”
Did you experience a large or unexpected increase in your electricity bill in April? Leave a comment below or send an email to [email protected]
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Source: Wales Online

John Cameron is a journalist at The Nation View specializing in world news and current events, particularly in international politics and diplomacy. With expertise in international relations, he covers a range of topics including conflicts, politics and economic trends.