In 2014, the average dual fuel bill reached an eye watering £1,344. The average electricity bill was £592, and the average gas bill was £752. But averages can be confusing. So to give you a better idea of how your own bill compares, we’ve estimated the total bill for small, medium and large users in the chart above.
The medium house figure of £1,153 estimates what the typical house (median) actually spent in 2014, and is calculated using the ‘standard user’ profile used by energy companies and price comparison sites. The small and large estimates are the 1st and 3rd quartile respectively, which means half of the homes have bills between £784 and £1,604.
In this guide, we're going to explain how bills have gone up over the last decade, the factors that have caused prices to rise, and what you can do to control your own bill.
In 2004 an average home paid just £277 for gas and £288 for electricity, totalling £565. By 2014, the total cost for 15,000 kWh of gas and 3,800 kWh of electricity had risen to a staggering £1,344. In the chart below we show how the bill for a ‘standard user’ has increased over time. These are for the old ‘standard user’ from Ofgem but are right in line with the current average.
In cash terms this represents a 140% rise in bills. After you control for inflation (general rises in prices) bills were up in real terms by a staggering 88% between 2004 and 2014. This makes them by far the fastest rising component of household bills over the last decade.
This came as quite a shock, given that energy prices had actually declined by 22% in the period from 1996 to 2004. Taking a look at the individual prices of gas and electricity can help us to explain what happened.
As late as 2003 the UK was still a net exporter of natural gas. Fast forward a decade and we import more than 50% of the gas we use. First it was piped from Norway, then the Netherlands - now it comes in liquefied form from Qatar.
Being exposed to tightening international gas markets has been bad for British consumers, both in terms of what we pay for natural gas and electricity. Add to this the rising burden of transmission costs, social levies and environmental programs and prices have gone through the roof.
The graph above charts the average gas and electricity prices in the UK in real terms, so we’ve controlled for inflation in it. What it shows is that between 2004 and 2014, the real price of a unit of gas shot up 115%, while electricity prices jumped 63%.
What we actually pay in bills hasn’t risen quite as much as the first chart suggested, because it was based on a fixed volume of gas and electricity for a ‘typical home’.
Analysts generally use the ‘typical home’ numbers to smooth out the effect of weather or efficiency, but this number has in fact been revised down recently, because demand is steadily lower.
Here’s what the average home actually used over the last few years.
The slow downward trend in energy use probably reflects a few things: rising prices; the recession, warmer winters; better insulation; smaller house sizes. As we’ve noted in the graph above, the yearly fluctuations in gas use are largely a function of how cold the winter is.
In this guide we’ve shown that the average energy bill is up dramatically, that gas and electricity price rises underpin this, and that our consumption of energy is actually falling. To bring these stories together, we have some data that shows exactly what has driven the change in bills over the last decade.
Basically, a typical home’s energy bill rose by almost £500 in real terms between 2004 and 2013. Splitting out this change among the different drivers tells the story.
Rising wholesale energy costs have added £448 to the average bill over the last decade. Transmission cost are up £76, environmental and social levies added another £100, there was £30 extra in tax, and reduced energy demand over the period lowered bills by £165.
Once tallied up this means a total net rise of £488.
Although it’s interesting to know why your energy bills are up so much over the last decade, it doesn’t help you cut them much. But luckily there are a few simple things you can do to make sure you aren’t paying too much for energy.
Heating is generally the biggest factor in energy bills in the UK and accounts for 53% of money spent on gas and electricity. For every degree Celsius cooler your home is, your heating bills will fall by about 10%.
That doesn’t mean you should suffer a cold house. The smart way to do it is to have certain zones warmer than others and to avoid heating your home when you don’t need it. This way you minimize heat lost from rooms that don’t need the warmth and at times they aren’t used.
If you lived in a perfectly insulated home you wouldn’t have a heating bill, because all your heating system does it to top up heat that is lost. This means all insulation can cut your bills, but you need to be smart about it to make a good investment.
For the average UK home, many insulation technologies will pay themselves back in savings in just a few years. These include loft insulation, draft proofing, cavity wall insulation and hot water cylinders. These are the no-brainers!
Topping up loft insulation, floor insulation and having draft proofing done professionally payback in around ten years. Whereas options like external wall insulation, thermal walls and double glazing can take 50 years to payback in energy savings, so they should be done for comfort or looks rather than cash.
Monitoring your electricity use is a simple and effective way to get smart about energy. The cheap and easy option is something like a kill-a-watt that plugs in between the wall and appliance. This will quickly show up any standby problems. The more advanced option is to get a real-time meter. If you go this route make sure it has a prominent display and use it to help you turn off as much as you can when you go to bed or leave the house.
A decade back, low-energy light bulbs were inefficient, expensive and terrible. Now they’re more efficient, cheap and brilliant. With the exception of 100W replacement LEDS they are excellent value. Swapping an incandescent used for a couple of hours a day to an LED pays off in just over a year.
Before you head off to the shop, make sure you know what fitting you need (B15?), what shape you want (universal?), how many lumens you need (800 lm?) as well as how many kelvin (3000K?).
The most important time to consider the efficiency of your appliances is just before you buy them. Choosing a plasma instead of an LED screen will lock you into high energy use.
Most new appliances are pretty efficient due to EU regulations but it’s always worth having a look at its annual usage. For existing appliances, the big sucker are the tumble dryer and the fridge (because they're always on). Little things like keeping your freezer defrosted, using low temperature settings in your washing machine, and only boiling what you need help a bit.
Whether or not solar, solar hot water or a heat pump is a good idea for you depends very much on your situation. If you are off the natural gas grid and using electricity for heat, you should really look at your options, whether that is a heat pump, wood or wood pellets. Using electricity for heat is extortionate.
For solar it really depends. Do you have a good roof that faces the sun? What feed-in tariff will you get? How long will you stay in the home? Can you make it look good? If you are considering solar, make sure you get at least three quotes and that the panels and inverter are high quality.
Try to pay by direct debit if you can. According to DECC data, direct debit is around £50 cheaper than standard credit or prepayment for both gas and electricity. That’s a £100 saving just for being organised. You can also achieve similar savings by managing your account online.
No matter which energy company you’re currently with, it’s always worth checking the market regularly to see if you could save money by switching. If you are currently on a standard variable tariff (SVT), like much of the country, you are probably paying far too much for energy.
In recent years the gap between the average Big Six standard variable tariff and the cheapest on the market has grown to over £250, creating what is effectively a two-tier market.
If you are on one of these variable tariffs, you should consider switching to a more competitive one, like OVO’s Better Energy tariff.
*Source and notes for graphs and table
Typical Eenrgy Bill by House Size
Data: Typical domestic consumption values (TDCV) from Ofgem (2013). Prices data based on national average standing charge and unit ratesin 2014 from 'Energy Consumption in the UK' (DECC 2014)
Average gas and electric bills: 2004-2014
Note: All figures based on 'typical usage' of 15,000 kWh of gas and 3,800 kWh of electricity in cash prices. Please note the latest typical domestic consumption values published by Ofgem suggest that a medium user consumes 3,200kWh for Electricity and 13,500kWh for gas. The historical data used here is more representative of the current mean.
Average gas and electricity prices (p/kWh)
Note: All figures are a national average and include both the unit rates and the standing charge in p/kWh (2010 prices) - Source DECC Quarterly Energy Prices, March 2015
Average household gas and electricity use (kWh/y)
Note: There is a downward trend in gas use whhen data is adjusted for heating degree days - Source: DECC Energy Consumption in the UK (ECUK)
Cost changes in dual fuel bills 2004-2013
Note: CCC calculations based on DECC quarterly Energy prices & Ofgem's supply market indicators - Source: CCC Energy bill supporting data
The rising price of loyalty to the Big Six
Source: Energylinx.co.uk, accessed 02/08/12 and every subsequent Thursday to the 12/02/2015. Data uses Ofgem standardconsumption (profile 1) 2 for dual fuel users, averaged across all regions.
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