Gas and electricity bills can be a little baffling; a mix of numbers and jargon which can be really confusing and can leave you wondering what it all means and how it’s all calculated.
We’re all used to receiving energy bills, however, have you ever given thought to what your energy bill is actually made up of? You might be surprised to hear that the actual cost of your energy represents less than half of what you’re paying for.
Here at Gulf Gas & Power, we believe in total transparency.
The price you pay for your gas and electricity consists of six elements: wholesale costs, distribution costs, government schemes, operational costs, VAT and a profit margin.
If you’re a business energy customer, your bill could be slightly different because the amount of VAT you pay will vary based on the industry you work in and there may be different governmental obligations and schemes that you have to pay into.
- Wholesale gas and electricity costs - 38%
This is the cost of purchasing the energy you use. We work with wholesalers, who give us access to the energy markets where we buy electricity and gas for our customers.
Energy markets are really volatile. Because of this, we buy energy in advance, which allows us to fix the prices for our customers. This is how we price our fixed-term contracts and also explains why these have early exit fees applied to them.
- Network and balancing costs – 24%
Energy suppliers are charged for the maintenance and upkeep of the UK’s electricity and gas network; the pipes and cables which connect properties to the energy they use.
These charges vary based on the amount of energy being used and are passed onto customers in their bills.
Balancing costs are created when there is an imbalance in the energy network – either too much or too little energy is being generated. This is particularly important for electricity, which needs to be generated when needed. These costs allow the balance to be maintained.
- Government obligation and schemes - 11%
There are a number of additional costs we incur due to government levies designed to support the generation of renewable energy. These programmes are designed to reduce emissions and help the country meet it’s carbon targets.
- Operational and other direct costs - 18%
These costs relating to service, billing, metering and IT systems. Although we try to keep these costs down, we think it’s really important we invest in giving our customers the best service levels we can, which is why we’re proud of our Trustpilot reviews as well as our exceptional service team.
- Profit margin - 4%
Our profits allow us to expand the positive impact we make to the UK economy, by employing staff, growing our business and improving our services.
- VAT on energy - 5%
Energy bills contain Value Added Tax. Keep in mind, our Business Energy customers will pay different VAT depending on which industry they are in. All our Home Energy Customers will pay a standard 5% VAT on their bill.