The Best Way to Reduce Your Energy Bill Is To Understand It

The best way to reduce your energy bill is first and foremost to understand it. Yes, complex bills and limited time to look at the details, quite often mean that very few of us understand what our electricity bill is made up of, and therefore are not in a position to take any appropriate action to reduce it. According to research conducted by an international policy institute, the main cost components of the average residential electricity bill are:

1) Non-energy costs

•14% distribution charges – paid to distribution networks

•4% Transmission charges – paid to grid owners and or operators

•5% VAT

•5% metering costs

•12% environmental costs – to fund renewable energy incentivisation schemes, or in plain English, governmental or regulatory programmes which aim to incentivise households, small and large businesses to generate more renewable energy

2) Energy costs

•60% Actual Electricity costs

The costs that you can reduce if you manage your electricity consumption intelligently, is the actual energy costs or the energy consumed within a specific time period. However, given that the calculation of all non-energy costs (like distribution costs, VAT etc) are based on the value of the actual energy that you have consumed, the value of the non-energy components will fall as well.

No doubt that all the above are useful but they sound quite a bit technical.. The real deal is, what can we do to reduce our electricity bill? The answer is found in the following fact. The average household consumes most of its electricity in the following categories: a) heating / cooling, b) water heating, c) cooking and d) lighting.

To cut your electricity bill, you will have to take actions to address each of the above 4 categories. Based on research and experience, you can take the following actions:

Heating / Cooling: Use a digital programmable thermostat and try to keep the temperature at a normal temperature, and ideally reduce it by 2 degrees. This save you around £70 or $100 a year! If you can afford quality insulation then do it, alternatively seek advise and support from governmental or community schemes. Better insulation means that you can maintain your desired temperature for a longer period of time, whilst consuming less energy, and saving up to £300 or £$400 a year!

Water heating: Replace your old water boiler with an energy efficient (eco) model. There are many great boilers these days, and although they might seem a bit pricey, it’s a worthwhile investment in the long run. Use your water boiler during off peak hours rather than in peak ones – peak and off peak times are illustrated below.

3) Cooking: Replace your old cooking appliances with energy efficient ones, and when you use the oven, if it’s convenient, try to cook many meals at the same.

4) Lighting: Replace your old lights and bulbs with fluorescent ones. This can help you save up to £70 or $100 a year! Additionally, make better use of natural light in your house and office.