The methodology surrounding the HEPI project is designed to reflect the prices typically paid by residential customers in State capital cities in order to obtain:
- Comparable prices for household energy consumption (both electricity and gas)
- In relatively short time intervals (monthly)
- Taking into account different national consumption patterns (typical consumption levels)
- Reflecting different emerging tariff schemes, such as standard and competitive tariffs offered by incumbents and tariffs offered by competitors.
- Clearly separating out between the price for energy as a commodity, distribution and transmission charges, associated taxes and VAT.
It does so by aggregating the incumbent supplier’s standard tariff and the tariffs offered by the main players in each city according to their respective market shares (in most cases the local incumbent and its main competitor). By using these 3 tariffs, we cover most customers in each capital city (from 60% in London to over 99% in many other cities).
The value of each index is calculated by Energie Control Austria. The weight of each city price in the index depends on the latest national residential consumption figures and is updated annually.
1. Incumbent: The former (or current) monopolistic electricity supplier, which typically sells electricity to customers in the State capital city area.
2. Standard incumbent price: The price that residential customers in the incumbent’s area receive without any negotiation (by default).
3. Competitive incumbent price: The price which residential customers of the incumbent supplier receive if they leave the regulated price or request a better or different price or tariff type but remain with their by-default supplier. This price may be a variable or fixed term tariff (real-time, spot and other market based tariffs are at present not included).
4. Leading competitor price: The price which residential customers of the leading non-incumbent competitors (most successful in terms of organic customer wins) in the State capital city receive. This price may be a variable or fixed term tariff (real-time, spot and other market based tariffs are at present not included).
Other Data Characteristics
All prices and other statistics relate to:
- The first day of the month the data is collected
- Residential customers with a typical consumption for the State capital city
- Customers in the State capital city area of the state concerned
- To ensure comparability, sign in and other temporary bonuses and other forms of non-monetary benefits are not taken into account since they can distort the overall tariff offered, especially in cases where they are offered on a “one-off” basis
- Standing fees are added to the price per kWh so that the entire end-user cost is taken into account.
Energy Price Formula
1. Incumbent Standard Price Component = Incumbent Standard Price x Incumbent Standard Price Weighting*
2. Incumbent Competitive Price Component = Incumbent Competitive Price x Incumbent Competitive Price Weighting**
3. Leading Competitor Price Component = Leading Competitors Price x Leading Competitors Price Weighting***
4. Total Price (State price) = Incumbent Standard Price Component + Incumbent Competitive Price Component + Leading Competitor Price Component
*: Proportion (%) of all customers in that city who remain of their by-default price.
**: Proportion (%) of all customers in that city who have one of the incumbent’s competitive prices.
***: Proportion (%) of all customers in that city who have the non-incumbent competitive price.
Limitation: It is possible that in some States, competitive tariffs actually offered by incumbent and competitors may in some cases be lower than those officially published. This may raise the apparent relative price averages of such States within HEPI. In addition, it should be noted that it is accepted that not all customers receiving competitive prices receive the same price. This price represents the average price of the most popular players for the period being measured.