Index of Domestic Energy Supply Costs | February 2018

The Cornwall Insight Index of Domestic Energy Supply Costs is updated monthly, tracking the costs that electricity and gas suppliers face. It is baselined to a value of 1,000 points in January 2012 and is calculated using Ofgem’s typical domestic consumption values (TDCVs) for medium users.

In February 2018 the electricity index fell by 45 points to 1,400, primarily driven by falling wholesale costs. Reduced balancing use of system (BSUoS) and Residual Cashflow Reallocation Cashflow (RCRC) charges also contributed to the fall in the electricity index.

The gas index similarly decreased 45 points on the previous month and was exclusively driven by reduced wholesale costs. It fell to 993 points, falling below the 2012 baseline for the first time since October 2017. 

As the indices use month ahead wholesale prices, they were not impacted by the record price spikes seen at the end of February on the day ahead and intra-day markets as the period of extreme cold weather arrived in the UK. Instead, the prospect of milder temperatures and longer daylight hours translating into higher output from solar generation, were the main forces affecting prices.

While this trend of decreasing wholesale prices should continue into next month, the indices will begin to incorporate the third-party costs for the new charging year, where policy costs are likely to exert an upward force. On the other hand, the new regime of network charges looks likely to have a mixed influence, with electricity transmission charges falling for demand users in 2018-19.

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