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Why cheap wholesale electricity doesn't mean cheap bills

The wholesale price is only part of a household bill, and it is bought months in advance. A cheap or even negative price for an hour on the live market makes little difference to what you pay.

Updated 3 October 2026 · energy.org.uk editorial team

What makes up a bill

Ofgem's price cap is built from allowances for each cost a supplier faces. For July to September 2026, Ofgem gave these shares of a typical bill:

  • Wholesale energy: 45%
  • Networks (moving energy through the grid and local wires): 25%
  • Operating, debt and industry costs: 16%
  • Policy costs (such as the Warm Home Discount and renewable schemes): 6%

The rest is mainly VAT and an allowance for supplier profit. Domestic electricity in Great Britain has a temporary zero rate of VAT from 1 October 2026 to 31 March 2027.

Why wholesale changes reach bills late

  • Suppliers buy ahead. Most household energy is bought months before it is used, to protect customers and suppliers from sudden swings.
  • The cap follows that approach. Ofgem sets the wholesale allowance from forward prices over a period before each cap, and updates it every three months.
  • Other parts update less often. Network and policy costs are set using information published twice a year or yearly.

So a fall in wholesale prices today shows up, if it lasts, in a later cap period.

Live prices are a different measure

The live market price on our live page is for electricity traded for a short period, in pounds per megawatt hour (£/MWh). Your bill is in pence per kilowatt hour (p/kWh). £100/MWh is 10p/kWh, before network costs, policy costs, operating costs and tax are added.

Check

What to check first

  • The units: £/MWh for wholesale, p/kWh for household rates.
  • The period: an hour, a day, or the months the cap is based on.
  • Your tariff type. Some tariffs follow wholesale prices more closely, with prices changing every half hour; they carry more risk as well as more reward.

Do

Practical next steps

  1. See the current cap rates on energy prices.
  2. Consider a time-of-use tariff if you can move use to cheaper times; see smart meters and time-of-use tariffs.
  3. Compare tariffs with the tariff calculator.

Take care

Important limitations

  • The cost shares change each cap period.
  • Fixed tariffs are priced by suppliers, not the cap, but also depend on wholesale prices when they are set.

Related tools and guides

Sources

Official sources checked 3 October 2026.