Understanding your energy bills

When you receive your energy bill, only around half of it pays for the energy itself – known as wholesale costs. The rest covers delivering energy to your home, government schemes such as smart meters, and keeping your account running smoothly. There's lots more detail on what you pay for in your gas and electricity bills below. 

There’s a lot you can do to keep on top of the energy you use. Using less means saving money, so check out our tips and advice about how to be more energy efficient at home. We've put together some other suggestions too, see below. 

Wholesale energy costs

For gas it's 47% that goes towards wholesale energy costs, and for electricity it's 38%. Even though we generate our own electricity, we still buy it (and gas) in the wholesale market. This is so we always have enough and can get the best energy prices for our customers. As with things like petrol, the cost of energy goes up and down with demand. We try to protect our customers against any sudden rises by buying energy up to three years ahead. This helps to even out prices over time.

Network costs

Once we buy this energy, we need to get it to your home through the gas or electricity distribution network. For every unit of energy you use, we pay fees to keep the network’s infrastructure in good working order. Network costs also pay for power cut emergency helplines. Network costs account for 26% of your gas bill and 28% for electricity. 

Environmental and social obligations

As one of the main energy suppliers in the UK, we support the government in funding renewable energy and helping vulnerable customers. 1% of your gas bill goes towards funding environmental and social obligations and that's 14% of your electricity bill. Our efforts to be a more sustainable and responsible energy supplier have been recognised by a wide range of organisations.

Operating costs

This includes things like our UK call centres, sending your bills and reading your meters. We’re always looking for new ways to keep these costs as low as possible, such as offering MyAccount which lets you view and pay bills, send us meter readings or amend your Direct Debit details – all online. For electricity this is 18% of your bill and for gas this is 19%.

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. 

Operating profit/loss

This is the money we make or lose from supplying energy to our residential customers. In 2016 we made a small profit of 2% from supplying gas however for electricity, we actually made a loss of 3%.

From generation to bill – the story of your energy

It’s easy to forget the many different processes that lead up your bill landing on your doormat or appearing in your inbox. THis diagram should help you understand the story of your energy:

Energy companies produce electricity and extract gas

This energy is then sold via the wholesale market – prices go up and down based on supply and demand

We buy this energy at the best possible rate we can over time

We then add the extra costs that all the major energy suppliers face

These include meter readers…

…the national rollout of smart meters…

…our support for vulnerable customers and customer services

Your home is supplied with energy

Why is my energy bill so high?

If you’ve received an unexpectedly high energy bill then it’s worth checking to see why. Here are some of the most common reasons why your bill may be steeper than you’d hoped.

Not on the cheapest tariff?

We have a range of tariffs to suit our customers’ energy needs. Traditionally, our Standard (Variable) deal is more expensive and by switching to a cheaper fixed tariff you could save money. Why not check out our full range of tariffs to see which one you’d be best suited to. You can transfer instantly in MyAccount

Estimated to accurate bills

If you've just started providing us with meter readings then your next bill will be an accurate reflection of the energy you’ve used. If you tend to use a lot of gas and electricity, then you may have previously been paying a lower amount than you should have. So your new, accurate bill may seem expensive by comparison.

Is your home energy efficient?

If your bills are high this could be because your home isn’t as energy efficient as it could be. Why not take a look at our tips and advice on how to make your home a haven of efficiency. Some cost nothing whereas others are more expensive. All could help you to reduce your energy bills.

Meter not working properly?

Meters are usually very reliable but it is possible, although unusual, that yours may not be accurately recording your energy usage. If you think this may be the case, you can ask us to come out and check that it’s working properly.

Why do utility bills keep going up?

If you’re worried your bills are going up, it may help to understand why this could be the case. Below we’ve put together some of the main reasons for rising prices. Remember, there’s a lot you can do to keep on top of the energy you use. Why not check out our tips and advice on being more energy efficient at home.

Rising wholesale prices

We try and delay passing on rises in wholesale energy costs to our customers for as long as possible, but if prices continue to go up eventually we have to pass these increases on. 

Green levies and other taxes

Increases in bills can also be because of higher taxes and levies imposed by the government on energy companies. They include support for renewable energy schemes.

Investment in the grid

Bills need to cover repairs, replacements and upgrades to the National Grid in much the same way that rail tickets help to fund upgrades to our railway infrastructure.

Smart meters

Smart meters give customers greater control of their energy by showing exactly how much they’re using and what this costs in pounds and pence. Energy companies have been asked to pay for the smart meter programme by the government and many of these costs will be passed on to customers through their bills.

Energy inefficiency

Energy efficiency is one of the best ways to halt rising bills but if your home is wasting more energy than it should your bills may keep on increasing. Check out our tips and advice on how to be more energy efficient at home.