Where you live impacts the cost of your energy, and how expensive your energy bills are. Find out why - and what you can do about this postcode lottery.
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Why do energy prices vary by region?
The reasons are threefold:
- How many customers than energy company has in your areaThe first reason comes, quite simply, down to demand. If there are relatively few people in your area, then the per-unit cost is driven up.
- How much it buys from generators in your areaTo provide you with power, energy companies buy energy from generators. These purchases are made in advance based on predictions about demand, so if they need to supply more at short notice for instance, it can drive overall costs up.
- The different charges imposed on the energy supplier by your area's distribution networkThe energy suppliers distribute most of the energy through local distribution networks. The main 14 networks in the UK are owned by six companies, each of which may charge suppliers a different fee.
What do energy prices consist of?
You energy bill may be divided between electricity and gas, but there are other costs that go into your bill, too.
Wholesale gas and electricity is the majority of your bill, making up about 40% of the overal cost. The next-largest piece are network costs (the costs of distributing the energy), and the rest is operating costs (your supplier's overhead), VAT, and your supplier's markup, and finally you have costs relating to (green subsidies) that energy companies are required to pay by the government.
Therefore, if you are seeing an increase in your energy bills, the largest single factor will be the wholesale cost of gas and electricity, followed by the cost of distributing it.
How can I keep energy bill costs down?
The single-best way to keep your energy costs down is to use less energy, and there are ways you can save without resorting to wearing a winter jacket to bed.
First of all, make sure you are on the cheapest tariff. Be sure to compare energy prices to make sure you are on the best deal.
Energy suppliers have a range of tariffs offering dual-fuel discounts, discounts for paying by Direct Debit, and discounts for managing your account online.
Similarly, different suppliers offer different rates, even in the same area.
When it comes to reducing your energy use, make sure you do the simple things first. Ensure all your light bulbs are energy saving, check for draughts around windows and doors, and turn your thermostat down one degree.
Next, look into home insulation to save energy — and costs.
You should also make sure you take advantage of any government grants available to you. If you are receiving a pension for example you may be entitled to the warm homes discount.