The energy crisis is still ongoing. I am trying to find the best deal on my gas/electricity bill. This is becoming quite difficult.
I was interested to see if the prices I receive from suppliers were comparable to those of family members who live on opposite sides of the country.
This got me thinking: Does location play a role in setting your prices for energy companies?
Which areas of the UK have the lowest energy bills? And why would they be different in different parts of the country?
Postcode lottery – The cost of energy can vary depending upon where the customer lives
Grace Gausden, This Is Money, answers:The energy crisis is still ongoing. Millions are facing record high bills due to rising wholesale gasoline prices.
Cheap fixed-term deals have all but vanished, and prices are reaching more than £2,000 per year for some customers.
Moving to a default tariff may be the best option for many, considering the rising cost of fixed deals.
These are the ‘standard’ tariffs that energy providers put customers on if they are not signed up for a fixed rate deal.
They have become more expensive than fixed rates as they move up or down with the energy market.
However, as prices have risen, Ofgem’s price limit – which is not applicable to fixed deals – has made it possible for them to be cheaper.
Currently, the cap is at £1,277 for the average household – whereas fixed deals are reaching hundreds of pounds more.
With tariffs not being fixed at the beginning, more people are asking whether where they live in the UK can have an impact on how much their monthly energy bill.
It is true that energy prices vary depending on where you live. This is known as the “postcode lottery”.
Even though the difference isn’t significant, it is important to save money with rising bills and a cold winter ahead.
According to Uswitch, the electricity unit cost for a plan in Canterbury could be 14.06p. This could rise to 14.39p London, 15.25p Cardiff, and 16.55p Belfast.
The good news is that it should only make a difference of around £6 to the typical monthly bill.
Uswitch explained that the differences in prices are due to three main factors: how much energy is sold locally by the supplier, how many energy is bought from regional generators and the infrastructure costs charged by local distribution networks.
This is Money asking Energy Helpline, an independent price comparison service. To learn more, please click here.
Energy Helpline spokesperson replies: Prices vary by region – there are 14 energy regions in total – and so the standard cost of energy varies according to where a consumer lives.
Generally speaking the difference isn’t huge, but it can by up to £70 for a yearly bill.
The North of Wales and South West of England are currently the most expensive, while the North East of England is and East Midlands are the least expensive.
Each energy supplier sets its own prices to get the same gas or electricity.
Grace Gausden, This is Money adds: Ultimately, each region’s local energy distributor will have their own charges set for suppliers, who will then pass the additional cost onto customers through their energy bills.
Each area is unique, depending on how much energy they can generate and the cost of that energy.
Because of their higher supply of renewable energy or fossil fuels, some regions may be able to get their energy supply more cheaply than others.
In Scotland, for example, where there is a large oil supply, the energy tends be cheaper.
Similar results can be seen in other parts of the country that have experienced more fracking. There has been a greater supply of gas on the network.
While other regions might have many customers, they may not have enough energy generating solutions. This will make the supply more expensive once it reaches homes.
Prices can also be variable because the local distribution networks which operate the electricity and gas supplies in each area are effectively monopolies. This means that energy companies have to use them.
Unlike the energy market, there is no competition that forces them to lower their costs or fight for customers’ money. Standing charges are built into the overall plan.
Different: Bills will be slightly higher in certain parts of the country, but not significantly so
Although it may seem strange that every energy supplier will have its own prices for the same gas or electricity from the same local distribution system in the same area, each provider has its reasons for setting these prices.
The theory is that if there are many suppliers in the energy market, they will keep their prices low to retain and attract customers.
This is due to the ongoing crisis and record high bills.
It is expected prices will continue to rise into the next year with the price cap likely to increase by around £300 or more, according to experts, when it is next reviewed in April.
For now, households need to keep an eye on their bills to determine if they could save money by moving tariff. A default plan would be the best value.