You’ve probably questioned what goes into the cost of your energy bills more than once. You’re not using more energy than before, and wholesale prices have come down since the peak of the energy crisis.
It’s not just you. Only 24% of people can accurately name the key components of their energy bill, and that’s perhaps not surprising given that just 22% think the government is transparent about energy costs.
The answer isn’t simple, and it’s largely outside your control. Your energy bill isn’t just a reflection of what you use day-to-day – it’s a collection of costs from across the entire energy system, many of which are set by government and regulators, not your supplier.
At Utilita, we’re on a mission to make the cost of the energy transition fairer for vulnerable, low-income households across the UK. That requires action from not only the suppliers, but government and regulators too – so we can build a future that’s fairer, more transparent, and built around the people who rely on it most.
To understand how this change can have an impact, let’s break down what you’re really paying for.
What is included in an energy bill?
For every £10 you spend on energy, only £4.24 goes towards the actual cost of the electricity and gas you use at home. The rest is made up of:
- Network costs (£2.51): The charges paid to maintain and operate the infrastructure that moves energy around the grid.
- Operating costs (£1.16): The cost of running a supplier, including billing, metering, and customer service.
- Policy costs (£0.74): Government schemes that energy suppliers are required to fund through customer bills, rather than through general taxation.
- VAT (£0.48): A 5% tax applied to the total bill.
- Debt (£0.30): Domestic energy debt now stands at around £5 billion, and those costs are spread across all customers.
- Supplier margin (£0.26): Ofgem’s price cap allows suppliers just 2.4% EBIT, and in reality, most haven’t come close to achieving it.
- Industry costs (£0.21): The costs of running industry bodies, including the DCC which manages smart meter communications (the majority of costs), SEGB which runs campaigns on smart meter adoption, and other data services.
- Headroom (£0.10): An allowance of 1.5% added to other costs to account for uncertainty in Ofgem’s modelling and for changes within each cap period.
There is no single cause of rising energy bill costs, and most of the drivers actually sit outside what any supplier can control.
On average, people estimate that supplier profit margin makes up around 15% of their energy bill, when in reality it’s closer to 2.6%. Network costs are estimated at just 14% of the bill, despite actually accounting for over a quarter. And wholesale costs – the part people most associate with “the cost of energy” – are estimated at just 22%, when they actually make up the largest share.
If UK wholesale energy prices have stabilised, why haven’t bills?
Energy costs spiked sharply following Russia’s invasion of Ukraine. Since then, wholesale prices in the market have stabilised. But energy bills haven’t followed, and that’s because the structural costs built into every bill continue to rise.
In the UK, 66% of people are unaware that network costs alone are projected to add £108 to the average bill by 2031, as the UK builds out the infrastructure needed to deliver a secure, low-carbon energy system. These are necessary long-term investments, but the cost is currently landing directly on household energy bills rather than being spread more broadly across society.
Policy costs covering schemes like the Renewables Obligation are another significant factor. These are government-backed programmes funded through energy bills rather than general taxation, adding to the burden on households regardless of how much energy they actually use.
Why is energy bill debt increasing across the UK?
Energy debt in the UK keeps rising, and it’s not just left over from the energy crisis — people are still struggling to keep up with their bills. With households now owing around £5 billion in unpaid energy bills (a figure that’s expected to keep growing), the cost of that debt is shared by all customers – pushing up the overall cost of energy bills for everyone. 65% of people are unaware that this hidden debt charge exists at all – meaning most people paying it don’t know they’re paying it.
Suppliers are effectively expected to absorb and manage debt risk on behalf of the wider energy system, without adequate means to recover those costs. The result is higher bills for everyone.
What needs to change and how are Utilita driving it?
At Utilita, we believe the conversation about energy bills needs to be an honest one. Energy bills are likely to keep rising unless the underlying structure changes, and that requires action from government and regulators, not just the suppliers.
68% of people say that if households can’t afford essential services like energy, it’s a sign that incomes aren’t keeping pace with the cost of living, and 70% believe that government should step in.
That means looking seriously at where the costs sit, how infrastructure is funded, and whether the current system fairly distributes the burden of the energy transition. Vulnerable and low-income households are currently carrying a disproportionate share of energy bill costs, while accessing fewer of the benefits.
We’ve set out our thinking in full in our Fairer Energy report – a detailed look at what’s driving bills, what needs to change, and what an action plan for reform could look like.
Read the Fairer Energy report here.
This blog references data from Utilita’s Fairer Energy report (June 2026), based on the July–September 2026 Ofgem price cap for direct debit customers.