How are UK gas and electricity bills calculated?
Tory bank benchers have today renewed calls for the government to scrap the “green” policy costs they say add £153 a year to the average home’s annual gas and electricity bills. While it is a significant sum, it is a fraction of the overall cost which stands at just under £2,000 a year. Here’s how your bill is currently calculated.
The wholesale market price of gas and electricity plays the biggest role in determining the average energy bill, and following the steady rise in wholesale prices since last August, it now accounts for just under 50% of bills – £1,077 of the average capped bill.
Energy suppliers typically buy their gas and electricity from the market in advance, so Ofgem determines the cost of buying energy from the market by tracking wholesale prices over a period of six months ahead of the next price cap period. The price cap will be increased again in October, and unless wholesale prices fall substantially over the summer – something that looks very unlikely – average household bills are expected to rise to £2,600 a year.
The next biggest cost is that of providing and running the infrastructure of supplying the UK’s homes and businesses via pylons, gas pipelines and all the associated costs. At £371 a year this now accounts for about 18% of the average household bill. Network costs also include the increasing cost of having to bail out failed suppliers. Energy companies that take on customers after the collapse of a rival can claim “any reasonable additional, otherwise unrecoverable, costs” of taking on those customers – currently adding about £68 per household.
While people opposed to this element of the bill have portrayed it as an unnecessary green tax, this is not entirely accurate. Policy costs account for
Read more on theguardian.com
