How is your electricity price calculated?

The general perception about electricity prices is that the price you pay is just made up from the wholesale cost of the electricity plus the margin your supplier adds to that price.

Whereas these elements do create some of the cost the wholesale price of the electricity is sometimes less than half of the overall price you pay.

So what else is included in the price you pay?

To start with you have the cost of distribution from National Grid to you, the end user. Add to that the transmission costs of taking your electricity from the Power Station to the National Grid.

After these movement charges have been included you then need to add in some levies! First off is the Fit charge – this is the feed in tariff and helps pay for the electricity fed into the National Grid from small scale electricity generating devices, such as solar panels.

Next we need to add in the levy that covers the costs of meeting the governments target to supply greater volumes of electricity from renewable sources! The there are the costs for balancing supply with demand, the Capacity Market regulatory levy, and the Contracts for Difference regulatory levy!

The bad news is that these additional charges are only expected to increase, and in doing so make the management of your energy costs even more complex.

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