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Many UK consumers continue to be affected by the cost of living crisis with rising rent, energy and food prices. When it comes to energy costs, however, consumers are not powerless in managing their expenses.
In today’s world, where every penny counts, understanding what is included in your energy bill and the purpose of each charge or tax is key to better managing our energy use.
Here, we’re going to demystify the lines on your consumer energy bill. We’ll also provide strategies to help make your home more energy-efficient and sustainable for the future.
Making sense of your electricity bill can be challenging. There are multiple charges and fees that all add up to the grand total, but the meaning behind these numbers isn’t always clear. At the most basic level, energy bills contain two main components – gas charges and electricity charges.
The amount of energy a household consumes in the form of electricity or gas is measured in units of kilowatt-hours and cubic meters. Each household’s energy usage is different, but for reference, the average British household has 2.4 people and uses 2.900 kWh of electricity and 12.000 kWh of gas per year.
The amount of energy used is reflected in the overall cost of your energy bill, but the total owed with each bill isn’t as straightforward.
How much your household pays for gas and electricity depends on multiple factors, including your location, energy supplier, and tariff type. Adding to the total, you’ll also find some additional charges and fees that are added to each bill.
In addition to the cost per unit rates, you’ll also notice charges and fees such as standing charges, environmental and social obligation costs, and value-added tariff (VAT) on your electricity and gas bill. Understanding what these energy price fees are will remove some of the confusion from reading your energy bill.
Energy providers add fixed fees to each energy bill, these are called standing charges. Energy providers apply standing charges to every account each day, regardless of the amount of energy consumed. Standing charges cover the costs of the system that delivers the energy to each home, meter readings, and various operational costs.
VAT is the additional tariff that is added based on energy consumption, and is applied to each household. Environmental and social obligation costs are built-in fees needed to cover certain programs and initiatives. For example, improvements to the grid and support for those who are more financially vulnerable come in the form of built-in fees.
Thankfully, protection for consumers against energy providers charging excessively high electricity and gas fees does exist! Ofgem (Office of Gas and Electricity Markets) set a price cap that helps control rising energy costs. This energy price cap sets the maximum amount that an energy provider can charge consumers based on per unit of energy used. It applies to households who are on a standard tariff and pay via standard credit, direct debit, prepayment meter, or E7 meter.
As a result, Ofgem serves an important role in protecting consumers from unreasonable and excessive energy fees. This is especially important in times of rising energy prices. As of July 2023, the maximum amount a household can pay for a dual-fuel energy bill is set to £2,074 per year, which reflects the recent falls in wholesale energy prices. From April 1 until June 30, the capped price is a little lower at £1,690 per year, for a typical household.
There are a number of factors that influence the price cap set by Ofgem. These include the price that suppliers pay for energy, maintenance, and upkeep for the energy network, and the supplier’s cost of business, among others. The cap ensures that energy providers aren’t overexaggerating the costs passed onto consumers.
How the energy cap affects the cost of energy is complex. Ofgem monitors current wholesale energy prices and adjusts the cap accordingly so that each household’s electricity and gas bill more accurately reflects current energy prices.
When calculating the price cap, Ofgem includes the price that suppliers pay for energy, along with the costs of maintenance and upkeep for the energy network, the energy provider’s cost of business, and government programs, along with a few additional minor factors that influence the costs reflected in your electricity and gas bill.
The energy price cap directly influences the energy costs for households on their supplier’s default standard variable tariffs and repayment tariffs. Due to the structure of the price cap, the cost of energy for each household is different and based on its energy consumption, location, and energy provider.
Energy consumption is the main point of consideration when looking at how the price cap affects your gas and electricity bills. What the cap does not do is set a limit for the size of an energy bill. The cap is placed on a per-unit charge, but consumption of those units will affect how high or low an energy bill is.
For consumers, understanding how the energy cap works is important for managing their household costs associated with energy. Even with the cap in place, it’s important for each household to monitor their energy usage and make adjustments, such as changing energy consumption habits or considering alternate tariff options.
In general, fixed-rate tariffs are cheaper than variable tariffs, but this is not always the case, making it important to keep an eye on how the energy costs of different types of tariffs compare and change.
One way for households to reduce their gas and electricity bills is to work toward being more energy efficient. Even with rising energy costs, there are steps that can increase energy efficiency to reduce the amount spent on energy costs and lessen the environmental impact of our energy use.
Many homeowners can benefit from receiving an Energy Performance Certificate (EPC), which is a graded assessment of a home’s energy efficiency. An EPC can help identify key areas to invest in home improvements to lower energy bills.
Many homes in the UK receive lower grades, simply because of the age of the structure combined with minimal energy efficiency upgrades. London and the South East have the most energy-efficient homes across England and Wales, on average.
In addition to acquiring an EPC, there are a number of things homeowners can do to improve their energy efficiency. Taking action to add or improve insulation, replacing old windows and doors with energy-efficient models, and investing in energy-efficient appliances and lighting are just a few examples.
Depending on your home’s EPC rating, you may be eligible for energy support. Under the Great British Insulation Scheme, homeowners might be eligible for support if their home has an EPC rating of D to G.
Energy Performance Certificates are a means of measuring a structure’s level of energy efficiency. By law, landlords are required to supply an EPC to tenants, and they are used in the buying and selling of homes so that potential buyers can understand how the home’s efficiency will affect their energy costs. EPCs are one of the most valuable tools we have for not only assessing a home’s energy performance but also for pinpointing where improvements can be made.
EPCs use a grading system that runs from A to G, with A being the most energy-efficient and G indicating a poor efficiency performance. A score of A, B, or C is generally considered satisfactory.
During the assessment, the assessor will look at lighting efficiency, windows, heating systems, and loft insulation. One should expect the assessor to take pictures and ask questions, such as the typical winter fuel use, whether any improvements have been made, and questions about the home’s construction.
At the end of the assessment, a report will be provided that includes the score and a list of suggested improvements for better energy efficiency.
While an EPC is an extremely useful tool in discovering how to make your home more energy efficient, there are strategies that any homeowner can take to improve their home’s efficiency and work with the energy price cap to keep their energy bills as low as possible.
Structural improvements can have a significant impact. Adding or improving insulation is key, as well as investing in energy-efficient doors and windows, if this hasn’t been done previously. Inside the home, making a switch to energy-efficient appliances and lighting can reduce the amount of price cap energy used.
If your home doesn’t need these improvements, or they aren’t in the immediate budget, there are additional energy-saving strategies that can be easily implemented. Consider draught-proofing windows and doors, switch appliances off and unplug them when not in use, turn down the radiators in rooms that aren’t in use, and wash clothes at a lower temperature. These are just a few of many ideas to help combat rising energy costs.
Here’s a table comparing the potential energy savings and cost savings for different energy-saving measures:
| Energy-Saving Measure | Potential Energy Savings | Potential Cost Savings (per year) |
|---|---|---|
| Loft Insulation | Up to 25% | £135 – £305 |
| Cavity Wall Insulation | Up to 15% | £90 – £275 |
| Double Glazing | Up to 10% | £80 – £125 |
| Energy-Efficient Boiler | Up to 30% | £200 – £400 |
| LED Light Bulbs | Up to 80% | £35 – £90 |
Note: Potential savings may vary based on factors such as property size, location, and energy usage habits.
The UK aims to reach net zero energy by 2050 – that’s quite the challenge. A major component of this plan is the investment in renewable energy sources. On a large scale, renewable energy allows us to reduce our carbon emissions as a whole and promote less costly energy-use practices. Not to mention more sustainable practices!
Today, we have effective renewable sources of energy, including offshore wind energy, solar power, and hydroelectric energy. Currently, in the UK, offshore wind energy is the most prevalent energy source. At this time, it accounts for 19.2% of all electricity.
On a smaller scale, households can take steps to make their own homes as close as possible to net zero. For example, solar panels and solar battery storage can significantly decrease a home’s reliance on traditional energy sources.
Investing in renewable energy sources, both on a large scale and in our homes, is an important step in combating climate change and reducing our carbon footprint. By taking these steps and diversifying our energy supplies, we’re able to reduce greenhouse gas emissions from fossil fuels. The quality and integrity of our environment will improve as a result.
There are several factors that are driving the rise of renewable energy in the UK. This is a good step to achieve our goals of a more sustainable future. Advancements in renewable energy technology have been significant, and we’re seeing their popularity and effectiveness reflected in the lowering costs of these technologies.
New technology has been partnered with a growing public demand for more sustainable energy solutions, and the government in the UK is keeping pace as well. The budget for Britain’s flagship renewable energy scheme is called Contract for Difference. They recently received a significant boost in funding to help the UK along in meeting its 2050 net zero goals.
It’s important for all of us to embrace renewable and sustainable energy sources and initiatives. The more we embrace sustainable energy, the more government-backing initiatives receive. This leads to a decrease to each household’s bottom line through increased savings in their energy bills.
Offshore wind is the most widely used form of renewable energy in the UK. As an energy source, offshore wind has the potential to generate clean, environmentally-friendly, sustainable electricity.
Compared to onshore wind energy alternatives, offshore wind is more efficient. Consider the wind limitations of land versus those of the ocean. Onshore, wind is limited by geography, structures, and other factors. With the ocean, there are no such limitations, which allow offshore wind to produce more energy.
There are a few disadvantages of offshore wind, but they are minor and relatively manageable. Generally speaking, the infrastructure to support offshore wind is higher than other sources of renewable energy. Also, offshore wind structures can be more challenging to maintain, but the overall output mitigates the extra costs.
The difference in efficiency between onshore and offshore wind production translates to reduced carbon emissions and a more sustainable future.
Energy consumers can manage their energy costs by choosing a good energy supplier. Energy needs, budget, and environmental ideals of said company should align with your preferences. When comparing energy providers, there are a few important details to consider when making the best choice.
For example, tariff rates are and should be a key consideration. The two main tariff types are fixed rate and variable tariffs. A fixed-rate tariff locks in the price, protecting consumers against price hikes. If a fixed-rate tariff is best for your budgeting needs, consider an energy provider with the lowest fixed rates.
The other option is variable rate tariffs. An energy provider offers a rate that is most aligned with the current wholesale price of energy and gas. Variable rate tariffs can be positive or negative depending on the situation. There are times when consumers can save a significant amount of money because the rates are lower than those offered with fixed-rate options, but there’s also the risk of paying more with no end in sight.
Whichever tariff rate a consumer chooses, it’s important to shop around and compare the rates offered by different suppliers.
Choosing an energy supplier is a significant decision. The choice you make can impact the bottom line of your energy bill and the level of satisfaction with your energy provider.
When comparing, it’s important for energy consumers to look at factors such as tariff rates, the level of service offered, if they offer smart technology tools, if they are invested in green energy, and what their reputation is for customer service.
A good plan is to conduct research through a few different means. First, begin by researching energy suppliers online. Today, there’s a great deal that consumers can learn about energy providers from reliable sources online before they even make person-to-person contact.
Second, see what other customers are saying about each provider. This can be in the form of individual customer service reviews or through sites that specialize in assessing how energy providers perform.
Finally, contact the provider directly and speak to a representative. Do they answer your questions? Are their policies clear? What advantages do they claim to offer over competitors, and how do they follow through on their claims?
Customer satisfaction and service quality can make or break a customer’s experience with an energy supplier. The relationship between supplier and consumer is one that’s too important to make concessions for these main areas of the customer experience. For any energy consumer that is in the market for an energy supplier, customer service and satisfaction should be non-negotiable.
Fortunately, consumers aren’t left in the dark in terms of how energy providers perform in these areas. Consumer organizations like Citizens Advice are highly reliable sources. They help evaluate the differences in how energy providers perform in specific areas. Octopus Energy has a reputation for scoring well, while other big suppliers, such as British Gas, have less than stellar reviews in the industry.
Here’s a table comparing the customer satisfaction ratings and overall scores for some of the top energy suppliers in the UK, based on the latest surveys from Which? and Citizens Advice:
| Energy Supplier | Customer Score (out of 5) | Citizens Advice Overall Score (out of 5) |
|---|---|---|
| Octopus Energy | 5 | 4.2 |
| Ecotricity | 4 | 3.9 |
| E.ON | 3 | 4.1 |
| British Gas | 2 | 3.0 |
| So Energy | 1 | 1.4 |
Note: Ratings are based on the latest available surveys and may vary over time.
Energy consumers have a number of tools and strategies they can use to help them better understand and manage their energy costs, along with making better-informed decisions about their energy consumption, energy suppliers, and how they can help contribute to a more sustainable future.
Today, energy consumers have more knowledge and tools at their disposal. We can make informed decisions about energy usage and work towards a more sustainable, renewable future. With knowledge, we can all become active participants in shaping the energy landscape. Gone forever are the days of being passive consumers, as we now have more power and accountability than ever.
Taking steps like equipping your home with solar panels is one of the most cost-efficient ways to save on energy costs. Not to mention the impact solar energy has on self-sustainability! Soly is a sustainable energy company that can help. We offer solar panels that reduce home energy bills and allow you to sell energy back to the grid. Visit Soly today to learn more about our products. Easily set up a consultation to determine the number of solar panels your home needs for energy optimization. Together, we can shape a more sustainable energy landscape.
