Monday, 21 October 2013

With the Major electricty suppliers upping thier prices

We thought it would be handy to spend a bit of time on review and advice.

How much do we pay?

The average annual dual-fuel bill - covering gas and electricity - is £1,315 per household. This figure, published by regulator Ofgem in mid-September, is based on the latest assumption of the amount of energy a typical household uses.

Bear in mind, this is an average. The amount you pay depends on your energy consumption and the method of payment.

It is one of the largest regular bills that a household has to pay, behind mortgage or rent, and council tax. Prices have risen in recent years, and analysts predict another increase in the coming weeks.

How much of my bill ends up as the energy firms' profits?
The argument over whether the major energy suppliers' profits are "excessive" is central to this debate.

The regulator has been collecting data on these firms' profit margins for the past three years.
The latest statistics, from mid-September, show that the average profit margin made on the £1,315 bill is £65. This was £30 higher than September 2011 and September 2012.

However, it is worth bearing in mind that this is a snapshot and the figure has been volatile. In some months, the profit margin has risen above £100, whereas in others the margin has been negative.
Ofgem says that seasonal factors are key to this volatility.

Where does the rest of the money go?
By far the biggest chunk of your bill goes on the cost of buying gas and electricity on the wholesale market, or directly from an electricity generator or gas supplier.

This, in addition to the costs of running a retail business with billing and sales, accounts for 67% of a gas bill and 58% of an electricity bill, according to Ofgem.

But this is where the figures get really complicated. Wholesale gas and electricity is not a single product but a whole series of contracts. Each company's team of traders will be buying energy at different prices, depending on whether this is delivered tomorrow, next month, or even in five years' time.
They spread out the purchases of energy to mitigate the risk of volatility when, for example, there is unrest in an oil-producing region.

What else does my bill cover?
About 16% of it goes on distribution charges - the cost of the gas pipes and electricity wires that get the energy into your home.

The cost of high pressure gas and high voltage transmission networks account for 2% of a gas bill and 4% of an electricity bill. VAT accounts for 5% of each.

A bit goes on costs of metering and storing gas. Then, 6% of a gas bill and 11% of an electricity bill go to government schemes aimed at saving energy, reducing emissions and tackling climate change.
It is these "green" fees that the energy suppliers say have pushed up the cost of a typical bill in recent years.

did that help???

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