Gas suppliers are the public face of the gas industry. A major part of their role is to pull together the costs of other parties in the gas supply chain. These third parties play a crucial role in producing and delivering your gas and the majority of their charges are regulated by the energy regulatory body, Ofgem. Suppliers build these infrastructure costs into your prices depending on the type of meter you have, its location and the type of contract you have with them. So these costs can be included in the unit price of your gas, charged separately as a standing charge or being itemised individually. They comprise the following:
1. Energy cost
This is the cost of the gas purchased on the wholesale market to cover your predicted future usage. It is the single biggest component of the unit price and accounts for upwards of 80% of a business’ total bill.
2. Infrastructure costs
These charges are paid by your gas supplier to the various participants in the gas market involved in importing, storing and delivering gas to your premises. They include a capacity charge for reserving capacity in the pipeline, gas store or other piece of infrastructure; fixed charges paid to National Grid or your independent gas transporter (IGT) for use of the network and gas meter; asset charges paid for the upkeep of the gas meter and network; unidentified gas charges to cover costs gas ‘theft’ or leakages from the network; read charges to cover the cost of reading the meter or an AMR charge if a smart meter has been fitted; and finally gas transportation charges. Costs vary by region and meter size and consumption.
3. Cost to serve
Costs incurred by your supplier to service your account. These include the costs of maintaining IT systems; paying the staff that manage your energy accounts; and the risks involved with your predicted consumption versus your actual consumption known as imbalance risk. This typically accounts for only a small part of your total bill, usually around 2%.