What Makes Up Your Gas Bill

What makes up your gas bill? From information provided in the suppliers consolidated segmental statements we have put together the chart below showing the different costs which make up the average domestic customer's gas bill.

Wholesale Costs make up the largest portion of customer bills. This cost is what your gas supplier has to pay for the energy it supplies you with and can be influenced by factors such as global competition and the type of fuel used to extract the gas.

Network Costs relate to the upkeep and management of the pipes and cables which supply your home with gas. For gas, network costs also included the cost of balancing supply and demand on a daily basis.

Envirnmental Obligation Costs are initiatives related to saving energy, reducing emissions and encouraging the take-up of renewable energy.

Other Direct Costs includes costs relating to market participation, these included administration and brokers' costs, sales commisions and third party data management.

Average Wholesale Gas Prices - Year on Year

Wholesale gas prices have fluctuated year on year for a while now, peaking in 2013 then, falling year on year since. We have charted the past 7 years for information.

The wholesale gas price below is calculated based on the physical cost of the gas itself divided by the volume of fuel as reported in the Centrica Consolidated Segmental Statements.

Average Wholesale Gas Prices

Because of the drop in the wholesale price of gas and much being said about this decrease not being passed on to the customer, we wanted to chart Centrica earnings (before interest and tax), 'EBIT' against their (operating costs).

Centrica Earnings Before Interest and Tax Vs Operating Costs Year on Year

What we see in the Centrica Earnings Before Interest and Tax Vs Operating Costs chart above is that when the price of gas fell in 2014, earnings dropped by £144M which appears to be largely down to a reduction in the sale of gas.

For 2015, the wholesale price of gas fell further and the sale of gas dropped by another £100M but earnings rose by £210M.

Below, we have charted Centrica earnings before interest and tax against the wholesale cost of gas, year on year.

Centrica Earnings Before Interest and Tax Vs Wholesale Gas Costs Year on Year