How the energy market works

The wholesale price is the cost of the energy itself, before the network charges, levies and taxes that make up much of a business bill.

• Gas. Gas still sets the electricity price much of the time, so the two markets move together. Gas is a global commodity affected by weather, storage, supply disruption and geopolitics.
• Weather and season. Cold, still periods raise demand and prices. Mild, windy periods lower them. Winter sits above summer.
• Generation mix. What is available to generate, and at what cost, in any given period.
• Expectations. Forward prices reflect what the market currently expects, not what will happen.

The forward curve is the set of prices the market is offering today for delivery in future periods: next summer, next winter, the year after.

It is not a forecast. It is the price at which buyers and sellers are willing to transact now for future delivery, and it moves daily.

A curve in contango slopes upward, with further-dated periods priced above nearer ones. A backwardated curve slopes downward.

The shape determines whether a longer fix locks a premium or a discount. It changes, and it must be checked at the point of decision rather than assumed. That is why no curve position appears on this page: any figure printed here would be wrong within weeks.

Not a view on direction. Five things:

• The shape of the curve today, across the periods you would be buying.
• How much certainty the business needs, and what it is worth paying for.
• Your renewal date against the April reset of regulated charges.
• Whether the supplier will fix the non-commodity elements, per fuel and per product, in writing.
• Whether staging entry across more than one date suits the business better than committing on one.

We do not predict prices. Not up, not down.

We set out what the curve is doing at the point of the decision, what we would weigh, and what the trade is. The decision stays with you, and we would rather you made it on the mechanism than on a forecast nobody can stand behind.