What’s in a price?

Energy prices are quite complex and technical in their make-up but here we aim to simplify them as much as we can. Essentially, the energy charges shown on a bill are made up of a number of elements including the energy rate, transmission charges, metering charges, administration charges, reservation and balancing charges, government levies and of course the supplier’s profit margin. These are explained in more detail below.

Energy Rate

The price of the raw energy (electricity or gas) is known as the energy rate and is arrived at by trading in the wholesale energy markets. Viewed a little like stocks and shares the prices can be affected by any number or combination of events such as the price of fuel-oil or coal, weather conditions, political unrest, terrorism, maintenance outages etc. The price arrived at is agreed by traders between the generators and suppliers and can change as often as every few minutes - dependant on what is happening. Larger supply contract quotes can therefore have a very quick shelf-life if the frequency of change is great.

Transmission Charges

There are a number of these included in the overall rate and represent charges made by National Grid Transco and local network operators for transmitting the electricity or pumping the gas through their networks.

Metering, Standing and Administration Charges

All gas and electricity metering needs regular maintenance – as does the infrastructure bringing the energy to the customer’s premises. All the data from the meters has to be collected and handled, processed and transmitted to the supplier for billing. The larger supply meters also have telephony to transmit regular readings for monthly billing. All these charges are included in the bill with different suppliers sometimes having different terminologies to
describe them.

Reservation and Balancing Charges

Whilst the definitions are different between gas and electricity supplies the intention is the same - to charge for reserving gas & electricity in the network in order to satisfy customer demand at any one time and to charge compensation for loss of electricity or gas during transit to the end user. There is also sometimes a charge levied to larger electricity users for balancing out consumption in certain machinery where there is a difference between demand and actual consumption.

Government Levies

These vary from time to time, but currently include Climate Change Levy, Fossil Fuel Levy, Hydro Levy and of course VAT. These are all charged at fixed rates (which are amended from time to time) but certain end users are entitled to exemptions and it is therefore important to understand who qualifies for what.

Suppliers Profit Margin

As indicated by the title this is simply the amount of the charge which goes into the suppliers coffers to pay for their overheads and contributes to net profits.

How Can Utility Assist Effect your Energy Price?

All the above pricing elements are published and fixed for certain time periods except for one - Supplier Margin. This remains the only area where negotiation can be made and that is where we come in. By knowing the market and what is/isn’t acceptable we can impactsuppliers margins sufficiently enough to make a noticeable difference to our client’s bottom line andachieve the best prices at the time of negotiation. Although we can’t alter the way the wholesale marketmoves, we can ensure the starting point is the best possible so our clients retain the competitive edge.