No price reduction expected on electricity bills despite two year low for wholesale costs

News that wholesale electricity costs have reached a two-year low will not mean reduced bills for domestic users any time soon. 

People grappling with the cost-of-living crisis may only see slight reductions in bills towards the end of the year. 

It emerged this week that wholesale electricity prices have now reached their lowest point in two years after falling by 64% in the 12 months to July.

This comes after a further decline in prices recorded in June, down by a third compared to June 2022, according to figures published by the Central Statistics Office (CSO).

Daragh Cassidy of bonkers.ie writes that there may be no change in domestic charges for a number of months, as energy suppliers buy their energy for delivery at different times throughout the year, and sometimes up to 12 or 24 months in advance through hedging.  

"So the price households pay for their gas and electricity is usually an average price of the cost of energy on wholesale markets over the course of up to two years. This is to try ensure households aren’t faced with extreme swings in the price of their gas and electricity on a weekly or monthly basis," he outlined 

"In short, household energy bills haven't reduced in recent weeks because there's been no real reduction to pass on. Yet.

"Gas has been trading way above its normal price until very recently. While electricity is still trading at around three times its price compared to two years ago.

"But if the trend continues we should see moderate falls before the end of the year," Mr Cassidy details on bonkers.ie. 

"With no immediate prospect of significantly cheaper energy bills, the only way to reduce your gas and electricity costs is to switch supplier to get a discounted introductory rate or to reduce your energy usage," he advises in his online analysis.