What role does National Grid play in your energy bill?

National Grid electric bills explained

This page covers how National Grid helps to supply properties with electricity and why we take a share from your energy bill. From National Grid electricity prices to Ofgem energy price caps, here is everything you need to know about calculating your energy bills.

In the video below, we explain how and why energy suppliers charge you for using electricity and gas. Step by step, we cover the entire journey that energy makes from various sources to properties around the UK.
 

Transcript:

We receive a lot of questions about how your household energy bills are made up. The bill you receive from your energy supplier is made up of many different charges. To explain these, it’s helpful to look at what's involved in getting electricity to your home. This should help you understand the different elements of your bill.

Let's start with electricity generation. This is where energy is converted from its original source into electricity. There are many different sources of electricity, including wind, solar, nuclear and fossil fuels, and all of these are used to generate electricity. Once the electricity has been generated, it's sold to energy suppliers, who in turn sell it on to you, the customer. Your energy supplier is the company you receive your energy bill from. You're free to use whichever energy supplier you choose. 

The cost of generating electricity makes up the biggest part of your bill. It’s calculated as a price per kilowatt hour, or unit, of energy you use. This unit price is set by your supplier and can vary according to the cost of generating electricity, which is directly linked to the cost of gas.

The recent rise in energy bills is due to the rising cost of gas around the world. The energy price cap, which is set by Ofgem, limits how much a supplier can charge for each unit of electricity and gas you use. The energy price guarantee, set by the UK government, has limited the price that suppliers can charge for each unit of energy you use. It's important to know that the price cap is not the maximum amount your bill can be; it's the maximum amount you'll pay per unit of energy you use. So, the more energy you use, the higher this portion of your bill will be.

For electricity to get from where it's made to where it's needed, it needs to travel through the electricity transmission network.  In England and Wales, this network is owned and operated by National Grid. Our transmission network carries electricity around the country at high voltage and is one of the most reliable and resilient networks in the world. 

£20 of the average annual household bill goes towards operating, maintaining and investing in the electricity transmission network. This charge is set by the energy regulator Ofgem every five years and is not affected by the price of energy. It's used to build and maintain the pylons, overhead and underground lines, cables and substations that transport electricity around the country. It's also used to invest in new infrastructure to connect more clean energy, like wind and solar, to the network.

Before it reaches your home or business, the high voltage electricity on the transmission network needs to be converted into low voltage electricity, so it’s safe for you to use. This is then carried through a local distribution network to your home. The local distribution network operator is responsible for this lower voltage network of pylons, cables and substations that take the electricity right into your home. 

Around £100 of the average annual household bill goes to your distributor to build, maintain and invest in the local distribution network. As with transmission, this is a fixed charge set by the energy regulator Ofgem and it's not affected by the price of energy. If you live in the Midlands, Southwest England or South Wales, National Grid is your distributor. If you live elsewhere, you'll have a different distributor. You can find out who your distributor is at energynetworks.org.

Gas and electric bills explained — FAQs

What is a standing charge?
A standing charge is the price you pay for energy per day, no matter how much electricity or gas you use. It’s set by your supplier and included in the energy price cap set by Ofgem. Your standing charge is included in your energy bill alongside unit rates and taxes, such as VAT.

What is calorific value?
Calorific value measures the energy contained in the gas supplied to your home or business. It varies depending on the source of the gas. Every day, National Grid measures the calorific value of gas in each local distribution zone and helps energy suppliers calculate an average for your bill period.

What is a bill period?
A bill period is the time between bills or statements. On the front of your bill, you will find the start and end dates of the period it covers.

Who pays my National Grid electricity bill?
Energy suppliers pay National Grid using some of the money they collect from customers. This money goes towards operating, maintaining and improving the electricity transmission network, through which electricity travels in England and Wales. As an energy customer, you don’t pay National Grid directly.