energymatters
Understanding energy prices Every day we’re reminded by the media about the current economic difficulties, but it’s not always easy to understand WHY prices are going up. That’s why we’ve put together this newsletter, to try and explain what’s going on behind the headlines.
“Higher unit rates don’t have to mean higher bills, we’re here to help.” Kevin Miles CEO npower Retail
• Change the way you pay We’ll give you a discount if you pay by Direct Debit throughout the year – quite simply because it’s cheaper for us to collect your payments and we can pass the savings on to you. Find out about Direct Debit please call 0845 0770 171 • P ay for what you use, say no to estimates There are around 26 million households in Britain, and getting around all of the ones we supply to read meters isn’t easy. So if you give us regular meter reads, it will help to make sure you pay just the right amount. We also have an online Meter Read Reminder service to help you say goodbye to estimated bills. To leave a meter reading call 0800 028 4361 you’ll need your account number to hand. ontact us for energy efficiency advice • C All the major energy suppliers have to advise their customers about reducing their use of energy, and at npower our dedicated specialists are committed to helping you do exactly that. For energy efficiency advice call 0800 02 22 20
Do you know... what makes up your bill? The cost of energy includes much more than just the price we pay for your electricity and gas. Take a look at the simple diagram below. What makes up the average gas bill?
-1%
5 % VAT
Profit
16 % Operational Costs
44 % Wholesale Costs
e.g. running costs
11% Other Costs
e.g. metering
21%
4%
Delivery to your home
Government Environmental Contribution
What makes up the average electricity bill?
4% Profit
16 % Operational Costs 16 % Delivery to
your home
This is based on the independent NERA report published in June 2010 and covers all suppliers. The average breakdown of bills is based on annual average consumption figures.
Now turn over to find out more about how we’re investing to secure energy supplies for the future.
5 % VAT 10 % Other Costs
e.g. metering
8%
Government Environmental Contribution
41 % Wholesale Costs
It’s predicted that the UK will soon have the largest ‘energy gap’ in Europe, as around a third of the country’s power stations close over the next few years. Even though we’re all doing more to save energy at home and in businesses, the demand for energy continues to increase. At the same time, the UK has committed to radically reducing emissions of greenhouse gases. As an integrated energy company, we both produce energy and supply it to our customers, so we have a big part to play in making all
this happen. To do this in a way that remains affordable for our customers and maintains the UK’s business competitiveness, we need to invest in a variety of new technologies, including renewables, gas, and new nuclear power. Only then can we be prepared for whatever the future may throw at us, and provide the best possible service to you, our customers. If you’d like to learn more about our commitment to future investment for UK energy please visit
npower.com
Did you know...
Did you know...
Did you know...
...We have over 460 wind turbines helping to power homes all over the UK.
...When fully operational our newest gas power station at Staythorpe has the generating capacity to produce enough electricity to power around 2.8 million homes.
...Every year we run education programmes for schools all over the UK and our power stations work closely with local schools and community groups to help them learn more about how electricity is made.
…building new gas power stations… Staythorpe A major new gas power station is in the final stages of construction at Staythorpe in Nottinghamshire. Four generating units capable of producing enough electricity to power around 2.8 million UK homes Reductions in average annual CO2 emissions by up to 7.5 million tonnes compared to an existing coal-fired power station producing the same amount of electricity Long-term benefits for the local economy which include around 80 permanent jobs at the station and lasting investment in the local economy
We’re investing more than £700 million in Staythorpe
…and renewable energy too Gwynt y Môr Offshore Wind Farm We’re investing in one of the largest offshore wind farms in the world off the coast of North Wales. Due to be fully operational in 2014 Average annual energy generation will be enough for around 400,000 UK homes Major boost to North Wales economy, with the community continuing to benefit throughout the operational life of the wind farm
We’re investing more than £1.6 billion at Gwynt y Môr
The ups and downs of energy prices This graph shows wholesale gas prices, petrol prices and npower’s gas prices from January 2007 to October 2010. 350 350
To stop retail energy prices from going up and down constantly, like wholesale prices, energy suppliers look ahead and smooth out the difference in costs.
Prices for Jan 2007 are indexed at 100
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Jan Mar May Jul Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr May Jul Aug Oct Nov Dec Feb Mar May Jun Jul Sep Oct
07 0707 07 07 0707 07 07 080808 08 08 0808 08 0809 08 09 090909 09 09 090910 0910 09 09 1010 10 10 10 10 10 10 07 07Jul 08Apr 08 Jun 09 09 09May 10 Oct 10 10 10 Feb Mar May Jun Jul Sep Oct Jan Mar Oct DecFebFeb Aug FebJul09 Apr JulDecAug Nov Jun Dec Jan May Mar May 07JulAug Aug07 Oct07Dec Apr Jun Aug Oct DecOct Feb Dec Apr May Aug Oct Nov Feb Mar May Jul Sep Oct 07 07 07 070707 0707 07 07 080808 08 08 080808 08 09 090909 09 09090910 09 09 10 0910 1010 10 07 07 07 07 08 08 09 08 09 09 09 09 10 10 10 10 10 10 10 10
Crude oil
Crude oil retail QCC gas npower npower retail QCC gas
Petrol Petrol gas cost for year ahead Wholesale
Wholesale gas cost for year ahead
The relationship between wholesale and retail energy prices is complex. As a supplier we buy gas and electricity in advance of when it’s delivered to you, our customer.
Energy suppliers may not pass on wholesale cost increases immediately and falling wholesale prices may not immediately result in bill reductions.
The red line on the graph above, shows the amount paid by an average npower gas customer paying by quarterly cash/cheque (QCC). As you can see wholesale energy prices are extremely volatile, because they’re tradable commodities and are therefore subject to global influences.
We’ve also included petrol and oil prices in the graph to show how closely they are linked. Petrol companies are able to instantly increase or decrease prices in response to oil prices.
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