Date: 4th Jan 2021 By: Dukefield Energy length: 5 minutes Tags: Utilities
The last few years have seen significant changes in the cost of electricity and the final charges you see on your contracts that feed through to your bill. It is important to understand the costs that make up your bill and what you can do to try to mitigate them, especially when budgets are tight. Dukefield Energy (previously named UPG), CPC’s Utilities framework sole energy consultants, provide details in this article.
The cost of energy
40% of your bill is the actual energy, the electricity that comes into your premises. We have a central electricity wholesale market in the UK where electricity is traded daily rather like the stock market. Influences on the cost of electricity are impacted by what is going on in the economy, world events such as Covid-19 and the weather. Electricity costs also have some links to the cost of oil and gas because over 30% of the UK electricity is generated by gas. Solar, wind, bio energy and nuclear are the other major sources. Last year we saw a large reduction in the cost of gas and electricity in April due to the Covid-19 lockdown.
Another set of charges that make up the bill are what are known as non-energy or third-party charges. These are a mix of charges and a major part of them covers the distribution of the energy from the power station to homes and business. The cost is fixed and is regulated by OFGEM (the government regulator). These charges have seen increases over the last few years as the network is constantly being reinforced and upgraded to support the new renewable generation. There are changes coming in 2022 but for those customers on fully fixed contracts these charges have been built in, so there is no need to be concerned. Those on a pass through contract are likely to see some changes from April 2022. We would advise you to ask your energy supplier on how these may affect you.
The other main charges are environmental charges set by the government. These are in place to support the development and implementation of new generation energy, in particular renewable energy such as wind and solar. These are increasing each year and now make up quite a significant part of the bill. Consequently, over the last few years customers have generally seen year-on-year increases in the cost on their electricity contracts.
Energy market costs are still relatively low due to Covid-19 and it is a good time to consider fixing your electricity and gas charges and your contract going forward to secure energy at these favourable rates. It is possible to fix energy contracts up to 5 years ahead, so you don’t need to wait until your contract is up for renewal.
Should you have any questions and want further insight you can speak to Dukefield Energy, as CPC’s sole appointed energy consultant they will be more than happy to help.