Utility bills contain a variety of charges, but what are you actually paying for? We look at how utility bills are put together, and how to cut down your usage.
The average utility bill is made up of several different components. Here is a breakdown of an average utility bill to give you a better idea of where your money is going, a guide to how you use, and tips on how to cut down your usage.
Breakdown of your average utility bill
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- Other costs
- Environmental costs
- Transmission charges
- Distribution charges
- Wholesale energy, supply costs and profit margin
Other costs4% of your gas bill and 5% of your electricity bill.
Includes meter installation and gas storage costs.
Environmental costs6% of your gas bill and 11% of your electricity bill
A proportion of your gas and electricity bill is used to subsidise the government's environmental initiatives.
Environmental schemes which are subsidised by your gas and electricity bill 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)
VAT5% 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 charges2% of your gas bill, 4% of your electricity bill
Transmission 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 charges16% of your gas bill, 16% of your electricity bill
Some 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 margin67% of your gas bill, 58% of your electricity bills
This 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.
Cut your costs
The biggest portion of your energy bill is taken up with heating your home and your water. Follow these tips and you could save a fortune on your heating bills:
Turn your thermostat down by 1 degree. This could save you as much as £60 over the space of a year.
Make sure your home is adequately insulated. Loft and cavity wall insulation may require an initial investment, but could easily save you around £310 a year in heating costs.
If you're on a low income, you may be eligible for an energy efficiency grant to make improvements to your home. Find out if you could be eligible and how to apply.
Help your heating to work more efficiently. Try using a radiator booster: a simple device that sits on your radiator and circulates the heat more efficiently, saving you between £70 and £140 a year on your bills.
Try to block any draughts that are coming into your house and make sure you close your curtains to keep the heat in.
In the kitchen
The next largest portion goes towards powering our washing machines, fridges, freezers and cooking appliances. Keep these costs down with these tips:
Do your washing less frequently . It may sound obvious - but keep the number of wash loads down by making sure the machine is full every time.
Use the 'economy' setting on your washing machine. Many washing powders will now work at temperatures as low as 30 degrees, helping your machine run more efficiently.
Dry your clothes outside or on a clothes horse. Tumble dryers use a lot of energy, and should only be used as a last resort.
Invest in a Hob Gas Saver to reduce the amount of wasted heat and energy when you cook. It simply slots over the gas burner to increase its efficiency, making energy savings of up to 12%.
Replace your current fridge/freezer with an energy efficient model. Look out for the energy efficiency stickers on modern appliances (pictured below). The greener, the better.
Computers, gadgets and electronics
Next up is the amount of energy used by consumer electronics such as DVDs, TVs and computers every year. Bring this cost down with the following tips:
Don't leave electronics on standby. If you are forgetful, invest in an standby saver - it will automatically cut the power to any electronics left on standby.
Don't charge your gadgets unnecessarily. For example, don't leave laptops and mobile phones charging overnight, as this is a big waste of energy.
Don't leave your computer and peripherals on when you're not using them. Make sure speakers/monitors/printers are turned off when you've finished with them.
Finally there is the portion of our bills going towards lighting our homes. The quickest, easiest ways to save on your lighting costs are to:
Buy energy efficient light bulbs. They last up to 10 times more than normal lightbulbs and could save you up to £40 over its lifetime.
Turn the lights off behind you when you leave a room. Try and get into the habit of switching the lights off as you move through the house.
Cut £383 off your energy bills in minutes
These energy saving tips will help you bring your energy bills down as well as reduce your carbon footprint. However, the quickest and easiest way to save on your gas and electricity bill is to compare energy prices online and switch to a cheaper deal.