What Goes Into Your Energy Bill?
Scott Warren-Pricing Wizard
Financial educator I Financial Director| helping business become confident in charge what they are worth and improve their financial cashflow | money advice | savings advice | debt relief
Last week I talked about the right price for your energy, not too cheap and not too expensive. I would now like to explain a little more about how the companies actually get to the figure on your energy bill. I am going to explain with some figures to help you understand.
The wholesale cost of the energy is around 46%. The next item on the bill is the cost of getting the gas or electricity to your home or business, this is around 24%. Then the next figure is the government policies, this includes things like the green tax that is charged by utility companies to use more renewable energy, this is around 10%. Then people seem to forget this is a business and like any other business it has to pay its business taxes which is around 6%. The next figure the company looks into is the operating cost, this includes staff at the call centre and company advertising, which is 9%. The final 5% is profit as every business needs to make profit to survive!Now let's look at this in terms of money. This is how your bill gets broken down:
Wholesale price of energy 6.9p
Transportation costs 3.6p
Government policy 1.5p
Taxes 0.9p
Business costs 1.35p
Profit 0.75p
Total price 15p hence 15p per kilowatt ?
Now the first four lines are pretty mandatory. Where businesses shave the cost is by reducing the business cost and not hiring sufficient staff to run at an effective rate for the business generated. Secondly, the business will run on investment as well and not look at making a profit so shaving off your electricity bill 1.75p per kilowatt reducing that down to 13.25 kilowatt which is not fair on the consumer.
Why is your bill actually high? Well some companies have what is called subsidiaries which is where some companies undervalue the market to the big users of energy like supermarket chains, retail outlets and big manufacturing companies. This could be as high as 2p per kilowatt and because of fear of market the profit figure could be 1.25p. What this means to the consumer is that they pay 18.25p per kilowatt or some will even charge 19p per kilowatt.
Hope this has been useful and if you would like to arrange an appointment about your utility costs then please feel free to get in touch.