A survey of 5,000 UK adults has revealed that nearly nine in 10 people have no idea where their energy bill money goes. Only 14 per cent could correctly identify the different costs that make up a typical household energy bill, according to research commissioned by energy supplier Utilita.
Misconceptions About Supplier Profits
The findings suggest many customers have a poor understanding of where their money goes each month, with supplier profits among the most misunderstood parts of the bill. People taking part in the research estimated energy firms keep around 13 per cent of the average bill as profit. In reality, supplier profits account for less than 3 per cent of a typical household energy bill.
Wholesale and Network Costs Underestimated
The biggest cost is the wholesale price of buying gas and electricity, which makes up around 38 per cent of the average bill. However, respondents believed it accounted for only 19 per cent. The cost of maintaining and upgrading Britain's gas and electricity networks was also widely underestimated. While network costs make up around 28 per cent of the average bill, those surveyed thought they represented just 12 per cent.
Hidden Charges and Policy Costs
The research also found many people were unaware of other charges included in their bills. More than half (56 per cent) did not know they were helping to cover the cost of Britain's domestic energy debt, which is estimated to stand at around £5 billion, through charges included in household energy bills. Six in 10 (60%) were also unaware part of their bill goes towards policy costs. These include schemes such as the Warm Home Discount and other government programmes that energy suppliers are required to fund through customers' bills rather than through general taxation.
Public Perception of Price Drivers
When asked what they believed was driving higher energy prices, 39 per cent blamed global events such as wars and trade deals, while 21 per cent pointed to inflation. The survey also found almost half (48%) believe it is the Government's responsibility to keep energy costs under control, while 49 per cent said ministers should do more to support households struggling to pay their bills. More than two-thirds (69%) said rising energy costs are a sign that incomes are not keeping pace with the cost of essential services, while 70 per cent believe the UK Government should step in if people cannot afford the energy they need.
Call for Fairer Funding
Bill Bullen, chief executive of Utilita, said: "We want the nation to better understand what is pushing up energy bills, and what needs to change to bring down costs for households and create a fairer way to fund the energy transition. We estimate that funding network upgrades through government bonds, rather than levies on bills, would save every household at least £108 per year by 2031. And by ringfencing VAT from energy bills to fund a meaningful social discount - as part of a reformed Warm Home Discount scheme - every bill payer could save a further £42, while those most in need could receive discounts of up to £450."
Support for Clean Energy Conditional on Costs
The research found support for the transition to a low-carbon energy system falls if it results in higher household energy bills. While 52 per cent said they currently support the move to cleaner energy, that dropped to 34 per cent if bills increased by between 6 per cent and 10 per cent, with support falling further as potential bill rises became larger. The survey also found 66 per cent of people believe the UK Government is not transparent enough about the non-energy costs included in household bills. Utilita, which commissioned the research as part of its Fairer Energy campaign, is calling for some policy and network costs to be funded through general taxation rather than added to household energy bills.
