How is your statement calculated?
We all know that the price we pay for goods and services in our day-to-day lives far outweighs the actual value of what we receive. The price paid includes cost for services such as advertising and marketing, delivery costs and profit, but which businesses are open and honest about it? In our on-going effort to be open and honest, we have outlined exactly what your energy payment goes towards below:
Key terms explained
As with any business, we incur general overheads in the day-to-day running of the company. Costs include: staffing, IT, building maintenance, billing, collections, and bad debt costs.
Customer service costs cover a full range of customer focused roles from new business, account changes and enquiries to payments and billing.
Marketing costs include the advertising, promotion and sale of our energy provision service. Some of these costs include development and maintenance of our website, presence on comparison sites and field sales and events teams.
Ongoing and successful advertising and marketing assists in strengthening the Co-operative Energy brand thereby securing our future as a low cost, ethical energy provider.
Government obligations refer to the costs we incurred in meeting government environmental and social policy obligations when supplying gas and electricity to your home.
The Renewable Obligation requires us to source a specified amount of the electricity they provide to you from renewable sources.
Ofgem issues Renewables Obligation Certificates (ROCs) to electricity generators relating to the amount of renewable electricity they generate. Generators then sell their ROCs to us.
Distribution and Transmission
This is the high voltage network of overhead cables and pylons, as well as underground pipes and cables that transport energy to your home from the power generators. Part of your energy bill goes towards paying for the distribution and transmission of your gas and electricity to your home.
A proportion of purchased energy is lost through energy transportation via the transmission and distribution network. This is referred to as ‘Line Losses’.
This is the cost for the renting and reading of your gas and/or electricity meters. The cost also includes meter maintenance.
Valued added tax, or VAT, is a tax assessed on the supply of goods and services by the British government. Gas and electricity supply for domestic use qualifies for the reduced rate of VAT of 5%.
In the early part of 2014, Co-operative Energy became the first energy supplier to receive the Fair Tax Mark accreditation. The Fair Tax Mark is the world's first independent accreditation scheme to address the issue of responsible tax. Our Fair Tax Mark certifies that we are paying the right amount of tax, in the right place, at the right time.
Commodity, or wholesale costs, refers to the cost of the electricity and gas we purchase before supplying to you. Wholesale prices can be volatile; therefore we buy much of our energy requirement up front to reduce the effect of large changes in wholesale prices.
This practice is known as ‘hedging’. Wholesale prices on any given day are therefore not a good indicator of suppliers’ wholesale costs.
The electricity we purchase is put into the National Grid. If the energy consumed by our customers does not match our original estimation and we use more or less electricity than we have contracted for (expected you to use), we must pay a charge. This process called ‘Balancing and Settlement’.
The ‘pre-tax net profit’ is calculated as the difference between the average customer bill and the sum of all costs.
In our promise to be ‘Open and Honest’, we declare our profit levels to our members each year. Our members decide what share of the profits is given to the members and what share is invested back into the business. They also decide what share is given to the local community.
As Co-operative Energy customer, you are invited to become a member of The Midcounties Co-operative. As a member, you will receive a share of the profits based on the amount of money you spend (invest) in our business each year.
The share of profits that are returned to members is based on how many points you have accumulated as a customer. Points are awarded on the money you spend and for sending regular meter readings.
Members decide on the value of a point, depending on our profitability and prospects that year.