Wholesale gas prices: What do they mean for your bills?
Page last updated at 11:54 GMT, Tuesday, 13 November 2012
By Del Crookes
Newsbeat reporter
An investigation has started into claims the cost of wholesale gas is being rigged.
When people’s bills go up, energy firms often blame the amount it costs them to get gas through wholesale prices in the first place.
But the Financial Services Authority (FSA) and the energy regulator, Ofgem, have launched an investigation after a whistle-blower contacted a national newspaper.
Seth Freedman said he became suspicious after sudden price drops and rises in wholesale gas prices.
Latest energy price rises
Continue reading the main story
SSE: 15 October, gas and electricity up 9%
British Gas: 16 November, Gas and electricity up 6%
Npower: 26 November, Gas up 8.8%, electricity up 9.1%
Scottish Power: 3 December, gas and electricity up 7%
EDF: 7 December, gas and electricity up 10.8%
E.On: No price rise before the end of 2012
The allegation is that dealers have made unrealistic bids, at exactly the time when information is being gathered to set the gas price, in an attempt to get a more favourable rate and so make a larger profit.
It’s said to have cut the cost energy companies pay but did not necessarily lead to smaller bills for consumers.
The six major energy companies – EDF Energy, Npower, Scottish Power, SSE, E.On and Centrica – have denied any involvement in any market manipulation.
Wholesale gas is bought and sold by traders working for energy companies from long-term suppliers and comes from as far away as Russia or as close as the North Sea.
Energy companies then sell it on to customers and businesses.
Around 45% of the average energy bill is made up of the cost of wholesale gas, supply costs and profit margins.
Last month Ofgem proposed changes to the way energy plans were sold to people to make it easier for people to understand their bills instead of the hundreds of price plans available at the moment.
They said they also wanted to make sure people were on the cheapest deals if they wanted them.
Other factors which change energy prices at the moment include where you live, internet-only tariff, if the deal involves a fixed price, when the deal was launched, how long it lasts.
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