EDF cuts domestic energy prices, but why do business energy prices work differently?

You may have seen that EDF has announced a price decrease for its domestic customers. It's the third energy supplier to do so; Co-operative and Ovo have already announced their price decreases.

Depending on how much attention you pay to the ins and outs of the energy market, you might also have seen these charts from Consumer Focus:

Images by Consumer Focus

They show the difference between the wholesale price that the energy suppliers pay for gas and electricity, and the price the customer pays.

As you can see, when wholesale prices go down, this saving isn't passed onto the customer immediately.

Many commentators have suggested that this is unfair, and energy suppliers have come under a lot of pressure to cut their prices in recent months because wholesale prices have been going down. 

Business energy prices work differently.

Firstly, most business energy contracts are fixed - so when you're locked into your contract, your prices stay the same. with domestic energy, most customers are on variable tariffs that can rise and fall as the supplier sees fit. 

Secondly, business electricity prices and business gas prices are far more volatile, they change almost every day. This is because - unlike the domestic market - business energy isn’t bought in advance, it’s bought as and when new contracts come in. This means that the wholesale market has a huge and almost immediate impact on business energy prices.  

This is worth bearing in mind when you're nearing the end of your contract - if you give our business energy advisors a call, they can give you an indication of what trends we're seeing in business energy prices. You can lock in a new contract four months before your existing contract ends too, which can give you a real advantage when it comes to securing the best price.

We're currently seeing a downward trend in pricing, so now's a great time to give us a call and discuss your business' needs (0800 688 8568).