How your energy bill is calculated
Although the unit rate and the standing charge are the two things you should look out for when comparing energy tariffs, it’s also worth knowing a bit about what costs go into making up those electricity charges.
According to Ofgem, the energy regulator, every dual fuel energy bill – whereby you have the same supplier for gas and electricity – is made up by the following costs:
- Wholesale costs (37.59%) – This is to cover the price your energy provider pays for the gas and electricity it sends to your home.
- Network costs (23.77%) – This is charged to pay for the cost of creating, maintaining and operating the gas pipes and electricity wires that transport energy to your home.
- Operating costs (18.35%) – To cover the cost of running an energy company and pay for things like billing, customer service and IT systems.
- Environmental/social obligation costs (11.34%) – This is to cover initiatives like the Warm Home Discount, as well as government programmes to save energy, reduce emissions and encourage take up of renewable green energy.
- Supplier pre-tax margin (2.82%) – This is your supplier’s overall earnings before interest, tax and other costs are deducted, like funding debt payments and government social scheme obligations.
- Other direct costs (1.37%) – This covers administration costs, brokers’ costs, intermediaries’ sales commissions and any wider smart metering programme costs.
These costs won’t be broken down on your energy bill, but will all be incorporated in the unit rate and standing charge.
Your bill will then include a separate charge for VAT, which is currently charged at 5% for households.
This means that, when you check your energy bill, it will show the following information:
- Your energy supplier’s contact details
- Your customer reference number
- The date of the bill
- The billing period
- The amount of your last payment
- The cost before VAT is added
- The amount of VAT to pay
- The total amount to pay, including
- The name of your energy tariff
- A payment slip
A dual fuel bill will also show the meter point administration number (MPAN) and meter point reference number (MPRN) which are the unique numbers used to identify the meters at your property.