Electricity costs: which are the factors affecting your bills?

Electricity costs are determined by a number of variables. There are three different specific components that affect your bills. We will list them briefly and describe them more specifically during this article.

  1. First, it is important to consider those services related to the sales stage. They basically determine the variable factor.
  2. Secondly, we will focus on those services that are specifically related to the network. Their price is based on a standard rate, which has been previously fixed by the authority in charge for gas and electricity.
  3. Last, we will need to consider taxes and any other types of related taxes.

After this brief introduction, let’s start analyzing, step by step the three different elements that we just listed, trying to highlight the main features and considering the impact they have on your bills.

1. The sales stage and its related services

If we think in quantitative terms when talking about the sales stage and its related services, we can affirm that, they represent the main costs on your bills. If we consider statistics, we can say that on average, these services have an impact of approximately 57% on your bills, that is to say almost €290 per year.
All the items related to these services can be considered as part of this category. Among them, we can include, the price of energy, that is strictly linked to the cost of electricity production. We shall also consider, the price involved for distributing energy, this includes all the activities carried out to keep a good balance on the electricity network, as well as, assuring a good balance between the offer and the demand. Last but not least, we need to consider the selling price, that is to say, all the commercial and administrative services aimed at helping the customer with electricity supply. Among these services, there are all those sales activities that represent the variable factors of your bills. This is a specific area, where electricity providers, depending on the offer they will propose, can make a real difference.

2. Network services

We will now be focusing on the second point we have previously mentioned. Network services are all those operations that convey electricity to different networks, on a national and even local level. These services make sure that the electricity arrives directly to the circuit panel. Their price is actually established by the Authority and, their cost will have an impact on your bills of approximately 14% (that is to say around €70 per year). You need to add an extra 17% that corresponds to the maintenance services, mandatory by law, that represent € 80 per year. Incentives for renewable energies, energy efficiency, safety of nuclear power, and subsidies to state railways are part of these services.

3. Energy Taxes

We finally analyze the last point related to taxes, such as the VAT and the excise duty. If we want to talk numbers, we are talking about an impact of 14% approximately on your bills (around €70 per year). When talking about this point, we need to highlight that the first 150 kWh consumed per month (if the household represent the main residence), families won’t pay any excise duty.

Instead, if the monthly consumption were to increase and exceed the threshold of 220 kWh, you will no longer be entitled to such a benefit and you will face a discount that from time to time, will be increasingly reduced. Lastly, remember that the VAT for households’ consumption is equal to 10% and is applied to every family component (the same happen for excise taxes).

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