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Last updated: 02 July 2021
Where you live has a significant impact on the cost of buying and distributing energy, which will in turn affect how expensive your bills are.
According to research by Ofgem
, the energy market regulator, North Scotland and London are the regions with the highest energy prices; while on average those in the North East of England pay the least. We’ve compiled a handy guide to help explain why.
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How do suppliers cost up an energy bill?
It’s important to know what you’re being charged for on your bill every month so that you can understand why some regions are more expensive than others.
Your energy bill will likely be divided between electricity and gas, but that’s not the only thing you are paying for. Despite being the largest single cost, wholesale gas and electricity only accounts for 40%* of your overall payment. The rest of the bill is made up of the following:
- Network costs - the cost of distributing energy
- Operating costs - your supplier’s overheads
- VAT - Value Added Tax
- Supplier’s markup - this is industry regulated, but will be different for each provider
If you see an increase in your bill, then the largest cost will be the wholesale purchase of energy, followed by the cost involved in distributing it.
*According to Ofgem's 2021 report.
So why do energy prices vary region to region?
There are many reasons why this happens, but here are the main three:
- The number of customers your provider serves in your area: It’s a simple issue of supply and demand. In order to provide your home with power, companies buy energy from local generators. These purchases are made in advance and based on predictions about demand. If the company knows it will be providing for a lot of customers in one area, they can bulk buy energy from the generators and then charge you at a comparatively low rate. Conversely, if there are too few customers, the price per unit of energy will be higher.
- Distribution costs charged to the energy supplier: There are 14 main distribution networks in the UK that are owned by 6 companies, and each will charge suppliers a different fee. These networks are essential for getting power from the generator to your home, but supply and demand affects how much they will charge the supplier for using their service. Your supplier passes this cost on to you.
- How much energy customers use in your area: In the coldest parts of the UK, for example North Scotland, customers will on average use more energy to heat their homes than the rest of the country. The network that distributes energy to these areas will factor that into their costs, which explains why they generally have more expensive bills.
Which is the most expensive region for electricity?
According to an Ofgem report in 2019, households in London paid the most on average for electricity, while those in the North East of England paid the least on average. Following closely behind were South Wales and the South of England. The gap between the average highest and lowest electricity bill was around £65.
Which is the most expensive region for gas?
Information from the same report states that the highest typical household gas bill was found in the South East of England, whereas those in Yorkshire paid the least on average.
The main reason for higher prices in certain regions was found to be network distribution costs.
How do I keep costs down?
There are many ways you can help keep your bills low, and it needn’t involve moving house or wearing all of your jumpers. We’ve compiled a list of things you could easily consider doing:
Switching tariff or supplier
This is perhaps the simplest and cheapest way to save yourself some money. Use our energy comparison tool to see if switching supplier or tariff could save you money on your bills.
Sometimes companies offer discounts for things like Dual-Fuel Tariffs or for paying via Direct Debit, but it doesn’t pay to be loyal to a particular energy provider and switching is much less hassle than you might think.
Energy saving lightbulbs
By ensuring that all the lights in your house are fitted with energy saving lightbulbs, you can be sure that you are reducing your electricity usage every day. This is by far one of the cheapest options.
Check for draughts
It’s important to keep an eye out for drafts through windows and doors, and put down draft-excluders along the bottom of a door or window frame if necessary. You can either buy them, or make your own from towels or cushions etc. Once you’ve done that you can probably turn down your thermostat by a degree or two, saving you money.
There are many ways to insulate your property, from double-glazing to internal wall insulation. Check out the options and see which one is most cost effective for you.
The government has a few grants and programmes available to bill-payers, so check out their website to see if you’re eligible for any of them. For example, if you receive a pension you may be entitled to a Warm Homes discount.