What makes up your energy bill?
We know energy can sometimes be confusing, and one of the most common questions we’re asked is what actually makes up an energy bill.
So we’ve made an infographic to show the breakdown of an average dual fuel bill. Keep on reading for a look at our infographic and an explanation of what these costs mean.
What makes up a dual fuel energy bill: our infographic
What is the cost of energy?
We know energy can sometimes be confusing, and one of the most common questions we’re asked is what actually makes up an energy bill – what am I actually paying for? We’ve made this infographic to show the breakdown of a dual fuel bill – and here’s an explanation of what these costs mean:
Wholesale costs: this is the “commodity” cost – the price we pay on the wholesale markets for gas and electricity to supply our customers. The wholesale markets can be very volatile, with prices shooting up and down every day, and sometimes every hour, in response to events on the other side of the world – so we buy our energy in portions over weeks, months and years in advance, to smooth out the cost for our customers. That means energy bills don’t rise and fall by large amounts all the time in response to the wholesale market in the way that prices on the petrol forecourts do.
Network costs: this is the price we pay for transporting electricity and gas along the electricity pylons and gas pipes that spread across the country. Some of this cost is for using the system, and making sure there’s enough energy in it to meet our customers’ needs. The transportation costs are split between using the National Grid’s transportation system, where the electricity is transported at high voltages on large pylons and gas through large pipes, and the local distribution network, where the electricity is gradually transformed down to the voltage we use in our homes and electricity and gas are delivered through smaller wires and pipes. These costs have increased in recent years, as more networks are built or upgraded to meet our changing energy needs.
Supplier costs: this is how much it costs us to operate as an energy supplier. That includes the cost of reading and maintaining electricity and gas meters, the cost of managing our customer accounts, and the 12,000 people we employ to look after our customers, from our customer contact centres in the North East to our offices and sites across the country.
It also includes our profit margin. We’ve invested billions of pounds building new power stations and renewable technology over the past few years, far more than we’ve made in profits over the same period – and it’s important that we make a reasonable profit to pay back the huge upfront costs of this investment.
Government costs: about 16% of your energy bill comes from the cost of environmental and social schemes – as well as taxes, like VAT, that go to Government. These include environmental costs: supporting renewable technologies, the Feed in Tariff subsidy for homes with solar panels on their roofs, and the cost of schemes that energy suppliers have to deliver to improve the energy efficiency of Britain’s homes and help customers lower the cost of their energy bills. The cost of government social schemes (such as the Warm Home Discount for vulnerable customers) is also included here, as is the cost of carbon from the EU emissions trading scheme and the Government’s carbon floor price. These costs have increased significantly in the last three years – which is why we try to work with Government to encourage them to keep the cost to the customer as low as possible when they create and develop new environmental and social programmes for energy companies to deliver.
So these are the costs – what can I do to keep them down?
The best way to keep costs down is to use less energy – from turning standby switches off to major energy efficiency improvements in your home.
You can find everything from simple energy efficiency tips to a full online survey on our website – or call our dedicated energy efficiency team for specific, personalised advice relating to anything from the Green Deal to support for our vulnerable customers.