What are you actually paying for in the average energy bill?
The average energy bill is made up of several different components. Here is a breakdown of an average energy bill to give you a better idea of where your money is going.
Breakdown of your average gas and electricity bill
- Meter provision
- Environmental costs
- VAT
- Transmission chargers
- Distribution Charges
- Wholesale energy, supply costs and profit margin
Meter provision
2% of your gas bill and 1% of your electricity bill.Meter provision is the cost of your meter, plus its installation and maintenance
Environmental costs
4% of your gas bill and 10% of your electricity billGovernment environmental initiatives have an impact on the cost of your gas and electricity, because a proportion of your bill is used to subsidies them.
These charges are not itemised on your bill, so you won't see exactly how much you are contributing.
Environmental schemes which are subsidised by your gas gas and electricity bills include:
- Feed-in Tariff scheme (FITs)
- Carbon Emissions Reduction Target (CERT)
- Community Energy Saving Programme (CESP)
- The Renewables Obligation (RO)
- EU Emissions Trading Scheme (ETS)
VAT
5% of your gas bill and 5% of your electricity bill.Contrary to popular belief, you do not pay full VAT on gas and electricity, but you do pay some. Currently VAT payments are capped at 5%.
Transmission chargers
3% of your gas bill, 17% of your electricity billTransmission networks are what actually deliver electricity and gas to your home, and some of the cost of building and maintaining transmission chargers is passed on to customers.
Distribution Charges
21% of your gas bill, 17% of your electricity billSome of the cost of building, maintaining and operating the local gas pipes and electricity wires which deliver energy to the home is passed on to customers.
Wholesale energy, supply costs and profit margin
64% of your gas bill, 63% of your electricity billsThis is the charge for the actual gas and electricity that you use, which makes up the bulk of your bill.
Wholesale cost refers to the price that the energy supplier has to pay for the gas and electricity they buy.
Supply costs are the costs the energy supplier incurs for the general administration associated with a retail business - for example running a call centre and sending out bills - these vary according to what tariff you are on.
Profit margin is the amount of profit the energy supplier makes from each tariff.