Understanding the UK Energy Market

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Britain’s energy market is well known for being overly complicated and difficult to understand. Mainly due to the number of complex charges, jargon and how it’s been sold. For many years, customers wouldn’t dare enter the realm of switching to save themselves from the complexity of the market. But because of the recent rises in the energy market, it’s now essential for customers to switch and compare energy suppliers regularly.

In fact, in 2016, we helped over 4,000 customers switch their energy supplier. The average saving was over £266, which considering it takes around 4-5 minutes, is a fantastic return.

Full competition was introduced into Britain’s energy market in 1999. Since then domestic and non-domestic consumers have been able to shop around for their electricity supplier. Suppliers buy energy from the wholesale market or directly from generators and arrange for it to be delivered to the end consumer. They set the prices that consumers pay for the electricity that they use. Allowing consumers to choose their supplier helps to keep the pressure on prices and drives better customer service. It also promotes innovation in products and services.

With the help of Ofgem, we’ve collected a few facts and figures on the UK energy market.

Energy Suppliers

In the UK Energy Market, suppliers compete on price and service to win customers. In setting their prices, suppliers will seek to cover their costs and to make a profit. They face pressure to keep their prices and costs down, or else risk losing customers to their rivals.

There are currently 52 active suppliers of which 43 provide both electricity and gas. Each supplier has on average 6 different tariffs to choose from, so when you compare energy suppliers, you’ve got a choice of a whopping 258 different tariffs available.

What goes into your energy bill?

Gas
Wholesale costs: 46.53%
Network costs: 22.88%
Environmental Obligations: 2.10%
Other direct costs: 0.62%
Operating costs: 16.17%
VAT: 4.76%
Supplier Margin: 6.93%

Electricity
Wholesale costs: 40.09%
Network costs: 25.16%
Environmental Obligations: 13.99%
Other direct costs: 0.65%
Operating costs: 15.40%
VAT: 4.76%
Supplier Margin: 0.94%

Understanding your energy bill
Ofgem produced a very helpful video on understanding your energy bill. https://www.ofgem.gov.uk/consumers/household-gas-and-electricity-guide/understand-your-gas-and-electricity-bills

For more information on understanding the market or your energy bill, subscribe to our monthly newsletter. If you’re interested in learning more about choosing your energy suppliers or what our clients say about us, visit our blog page.

Rhys Boven
Rhys Boven
Rhys Boven is the Managing Director at leading energy brokers Switched On Energy. Most people have no idea if they are paying the correct amount or are on competitive terms, Rhys uses his expertise in the industry to help his customers make more money, save time, have less stress and peace of mind. Connect with Rhys Boven on LinkedIn >>

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