Today, we have a guest blog from Npower, giving us the low-down on our energy bills and where the money goes.
When you switch on a light-bulb or turn up the thermostat you’re at the end point of a long journey of energy supply. And our energy bills reflect that. Read on for a look at that chain, and how you can influence it.
When your latest energy bill falls through the post box, or arrives in your online account you probably don’t think too much about the supply chain that has brought the power to your house. If you’re anything like me you’ll have a quick grumble then spend a brief moment thinking about cutting down on the number of baths you have.
That’s what I did last time I got a bill but later on that day, while I was having a soak in the tub, I got to thinking about the journey that energy travels on as it makes its way to our houses – and how the different stages and parties involved in that journey affect the price that we pay for our power. It’s an interesting journey – and understanding it can help you realise the power you’ve got in the whole process. Here’s a look at the main stages.
The wholesale costs
This is the commodity cost price that is paid for the materials that are converted into the energy that we use and it makes up 43.2% of our bills – in terms of consumer power, this is pretty far out of our control. For example, natural gas is the single most important source of fuel in UK electricity production, accounting for 38.5% of Britain’s electricity production in 2005.
Some of this gas comes from the North Sea but some gets piped in from international sources such as Russia and the Ukraine, and the murky world of geopolitics, the price of extraction and the cost of transport all contribute to fluctuations in the cost. Really, there’s not much we can do to affect these factors other than lobby the government about their energy policy.
The network costs
The costs of using and maintaining the National Grid and the local networks of pipes and wires that transports energy around the country and into our homes accounts for 23.3% of our energy bills. As our thirst for energy has grown over the decades, these costs have increased as new, more technologically advanced networks have been built and old ones have been upgraded. Again, this is a difficult area to influence as the need for the maintenance and improvement of these networks is self-evident.
The supplier costs
The energy companies that supply our power take around 17.2% of our bills to pay for their costs – such as managing accounts, reading meters and looking after customer problems. The percentage also covers the profit margin of the energy companies – a factor which can often draw the ire of consumers. If you have an individual complaint with an energy supplier, and you can’t resolve it amicably with them then you can take it to the independent ombudsman.
The government’s share
As Benjamin Franklin said in a rather sombre moment, there are only two certainties in life – death and taxes. The latter makes up another big contribution to your bill – around 16%. In addition to taxes, the government also levies energy companies for money to pay for environmental and social schemes. If you don’t like it – write to your MP!
Finally there’s you, the consumer
We finally reach an area where you have the power! You might not be able to persuade Russia to cut the price they charge for wholesale gas but you can turn off lights when you don’t need them. In fact there are loads of things you can do to save money on energy bills. For example you could:
• Install double glazing
• Get a smart meter
• Install better insulation (like Mrs Energy Saving did)
• Turn down the temperature on your washing machine
• Buy energy-efficient appliances
• Shut your curtains to save heat
• Don’t leave appliances on standby – switch them off
The list goes on and many of them are fairly sensible – requiring little or no extra effort. They might not cut down your bills by a massive amount but these savings add up and in the long run you might be surprised at the efficiencies you can make.
How will you cut down your energy bills?