What makes up your energy bills?

Your energy use is the most important part of your bill. Your energy provider charges you for each unit, or kilowatt hour (kWh) of gas or electricity you use, so the more you use the more you pay.

There’s a lot more to your energy bills though.

Wholesale costs make up the largest part of your energy bill. Other costs include network, policy and operating costs which help to maintain the energy network, contribute towards a net zero future, and supports vulnerable customers. The chart opposite shows the proportion each of those costs contributes to the energy bill of a dual fuel customer paying by Direct Debit with typical energy use, based on the January to March 2024 price cap.

Learn more about how your bills are broken down

Wholesale costs

We buy energy from electricity and gas generators on the wholesale market. The prices set reflect global commodity markets. As with other commodities like petrol, the cost of energy goes up and down with global availability and demand. Changes in wholesale prices tend to be the main reason for energy prices going up or down. We buy energy in advance at the best possible rates to help keep our fixed rate tariffs as low as we can.

Network costs

We don’t own the electricity wires or gas pipes that get the gas and electricity to your home. These costs are set by regional network companies we pay to run, maintain and upgrade the energy networks. Watch our quick video to see how energy gets to your home.

Operating costs

These are the day-to-day costs of managing your energy account, including billing and metering services. We’re always looking for new ways to keep these costs as low as possible. For example, we’re investing in a new account system and app so we can make managing your energy easier online.

Policy costs

We’ve never been busier helping to cut the UK’s carbon emissions. The electricity we source from renewables as part of our fuel mix is way above the UK average. We support the government in funding energy efficiency improvement schemes and obligations like smart meters. And we help to support vulnerable customers through schemes like the Warm Home Discount.

VAT

VAT is set by the UK government at 5% on all home energy bills. It’s lower than the standard rate of 20% which you pay for other household goods and services.

EBIT

Earnings Before Interest and Taxes (EBIT) – the profit we make after all other costs.