What’s in a bill
Bills shouldn’t be confusing. Quite the opposite in fact and this is something we feel passionate about.
Our team has put a lot of focus towards simplifying the billing process, ensuring emails and paper statements are clear to customers.
But how is your bill composed each month and what is it you are paying for?
We thought it would be good to set this out in a handy diagram, which explains the ratio of costs, which might surprise some customers.
As you can see, our bills are composed of six different elements
- Wholesale energy costs – 41.5%
- Delivery to your home – 27.3%
- Environmental, government and social policies – 5%
- Taxes – 4.8%
- Operating Costs – 19.2%
- Our profit – 2.2%
Wholesale energy costs: The biggest part of your bill is down to the cost of energy itself. To make sure we have enough gas and electricity to keep the country’s homes and businesses running, we need to buy energy from the wholesale market. Wholesale prices often change throughout the year. We try to buy at the best time, to keep our prices as low as possible. Some energy is bought on the day, but a large amount is bought months, often years in advance – which is known as hedging. Hedging helps reduce movements in our commodity costs, and cuts the number of times we have to change the prices you pay. The impact of commodity costs can change by year depending on how much energy you use, which can also be driven by the weather.
Delivery to your home: This is the cost of getting the energy you use to your home. Your gas and electricity makes its way through high pressure gas and high voltage transmission networks. It continues through local gas pipes and electricity wires – and finally ends up at your home. Operators of the regional distribution network and the national transmission system charge us for transporting gas and electricity and their revenues are controlled by the industry regulator Ofgem. The costs of installing meters, keeping them running safely and efficiently and reading them a few times a year are also included in our delivery costs.
Environmental, government and social policies: As you’d expect we pay VAT and corporation tax, but you might not know we have to contribute to a number of environment and social programmes set out by the Government too. The costs of various government policies that will ensure Britain has affordable, clean energy in the future are also rising – these are reflected in your bills.
Operating costs: Like every business there are costs involved in keeping it running smoothly and to give you the best level of service possible. Our costs include things like billing, sales as well as skilled people to help with any issues you have. To help cut costs we’re making changes to make our business to be smarter and more efficient.
Our profit: For every £100 that you paid on your gas and electricity bills, we made £2.20 in profit in 2014.
As you can see, it’s a complex structure but this should help customers understand what they are paying for and why.