What costs make up your gas and electricity bill?

Here we explain:

  • What costs make up your electricity and gas bills
  • Why energy prices change
  • Which products and services we're offering to help keep bills down

 

Understanding what costs make up your energy bills

We'll explain what costs make up your bill and what can impact these. 

The story of your energy: from generation to your bill

It's easy to forget all the different processes and activities it takes to get the energy to your home and then how they're covered in your bill

1. Energy companies produce electricity and extract gas

2. Prices for energy on the wholesale market can go up or down, depending on global supply and demand

3. We can't control wholesale electricity and gas prices, but offer customers a range of tariffs with fixed or variable prices

 

4. We add the extra costs that all of the major energy suppliers face, including.....

Supporting government initiatives …

… including obligations like smart meters…

… as well as our support for vulnerable customers and customer services

5. We power your home

What do energy bills include?

Wholesale costs make up the largest part of your energy bill. Other costs include network, policy and operating costs – these help us maintain the network and contribute towards a net zero future by supporting government low carbon initiatives. These pie charts show the current breakdown.

What costs make up your electricity bill

What costs make up your gas bill

Wholesale costs

Our gas and electricity costs are determined by the prices on the wholesale markets in the UK, which in turn reflect global commodity markets. As with things like petrol, the cost of energy goes up and down with global availability and demand.

 

Network costs

We don't own the electricity wires or gas pipes the energy flows through so we have to pay the companies that do. This money goes towards maintaining, running and upgrading the networks.

 

Policy costs

As Britain’s biggest generator of zero carbon electricity(1), we've never been busier helping cut UK carbon emissions to nothing. We also support the government in funding renewable energy and helping vulnerable customers. Our efforts to be a more sustainable and responsible energy supplier have been recognised by a wide range of organisations.

 

Operating costs

These costs cover running our call centres, sending your bills and reading your meters. We’re always looking for new ways to keep these costs as low as possible. For example, MyAccount and our mobile app which lets you view and pay bills, send us meter readings or amend your Direct Debit details – all online.

 

VAT

This is set by the UK government at 5% on all home energy bills. It’s much lower than the standard 20% which you pay for items in a shop, for example. 

Why are energy prices rising at the moment?

Wholesale prices

Wholesale energy costs make up between 40 – 60% of your energy bill and changes in the costs tend to be the main reason for energy prices going up or down.

Unfortunately, the wholesale cost of energy has quadrupled in the last year. That's why Ofgem is raising the energy price cap by 54% from 1st April.

While we hate having to put prices up, sometimes this is also necessary. When wholesale prices fell in 2020, we cut Standard (Variable) tariff customers' prices by an average of £100 a year.(2)

So why are wholesale prices going up?

  • As we recover from Covid 19, demand for energy especially from businesses has gone up, driving up the price
  • The last winter was colder than average in Europe and Asia, which increased the global demand for gas and reduced global gas reserves
  • Rises in gas wholesale prices have a knock-on impact on electricity costs, too, due to the impact on the cost of gas-fired electricity generation

 

Green levies and other taxes

Increases in bills can also be because of higher taxes and levies imposed by the government on energy companies


Investment in the National Grid

Bills need to cover repairs, replacements and upgrades to the National Grid. This is similar to the way rail tickets help to fund upgrades to our railway infrastructure.

A smart meter can help you save

It's important now, more than ever, to stay in control of your energy. With a smart meter, you'll easily be able to track your energy usage and see where you can save so that you can lower your bills and your carbon footprint.

Smart benefits include:

  • Upgrade your meter at no extra cost
  • You're in control - you can see the cost of your energy
  • Receive more accurate bills
  • Get a better idea of where you use energy in your home with Energy Hub(3) 
  • If you use cards or keys, you can top up online

Save up to £570(4) a year on your energy bills with home insulation

With the cold weather upon us and rising energy prices, we're all looking for ways to save on energy, as well as keep warm this winter. 

Did you know a well-insulated home can cut heat loss by 33%?(5)

As Britain's Best Value Largest Supplier, we're bringing to you the opportunity to buy professionally installed loft and cavity wall insulation.

Advice on what you can do at home to save energy

Read our tips on energy saving at home. Some of these are easy to do and completely free.

We're proud to offer our customers

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Value & Control

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