The average annual dual fuel energy bill for the next 12 months is expected to be £1,326, according to Ofgem's latest supply market indicator published today.

On the last Thursday of each month the regulator publishes its 12-month estimate of cost trends to help consumers understand the outlook for the different costs that make up their energy bill (join our free Cheap Energy Club to check if you can switch and save).

The supply market indicator looks at average annual bills based on all energy tariffs on the market and estimates the annual cost per customer faced by a typical large supplier to deliver gas and electricity.

Today's report sees Ofgem estimate that average annual dual fuel will cost £1,326 over the next 12 months. The regulator says this has fallen from last month's estimate of £1,328 due to the introduction of a number of cheaper fixed tariffs and because of its assumption that there will be a "gradual decline" in the amount of energy used over this period.

The regulator adds that average gas and electricity bills are estimated to be £739 and £608, respectively.

Ofgem's supply market indicator has also estimated how much each component of an energy bill will cost:

  • Wholesale gas and electricity costs, which is what providers pay for the energy they sell on to households, for the next 12 months are estimated to be around £588, or 44% of an average dual fuel bill. This is slightly lower than last month's estimate of £591. However, suppliers tend to buy most of the energy they deliver to households up to two years in advance, so the impact of lower wholesale prices will take time to filter through to your energy bill.

  • Network costs for the next 12 months are estimated to increase by about £3 to £305. Ofgem says this is due to updated indicative gas distribution and electricity transmission network charges for 2015/16. It adds that from 2015 it expects network costs to remain "broadly stable in real terms" (ie, excluding inflation) until at least the start of the next decade.

  • Environmental and social costs for the next 12 months are estimated to cost £91. Suppliers have to meet a range of Government environmental and social obligations to encourage energy efficiency and low-carbon energy and to reduce fuel poverty.
  • Supplier operating costs for the next 12 months are estimated to remain roughly the same as last month at £175.
  • The pre-tax margin a typical large supplier could make over the next 12 months, based on a 13-month rolling average margin, is estimated to be £105. This is up £2 from last month and is due to further falls in expected wholesale costs over the next six months.                            

When MoneySavingExpert.com asked energy experts in September for their thoughts on what will happen to energy prices over the next year, unusually, the majority sat on the fence (we've done this before and they've usually been quite robust), although one said the market is currently on a "knife-edge" and "could go either way", meaning there's a threat of prices rising.

See the Energy prices to continue rising, experts say MSE News story for more on this.

Martin Lewis
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