In most industries, location has an effect on price and the energy industry is no different. London is the most expensive place to live in the UK but on average electricity prices are the lowest there. North Wales is one of the cheapest places to live, but on average, people pay 2.17 more per kWh for electricity in the region than they do in London. Making some sense of these regional differences could help us save some money, so let’s have delve into the reasons for the variations.
Why is there a difference?
It’s a question that we’re often asked, and we can understand why. Energy is the same everywhere, it doesn’t change, so why should it cost more? Well, the two main reasons for regional difference is the demand for energy in your region, and the charges applied to your supplier by distribution networks.
Suppliers predict what energy will be needed and buy large quantities of energy at a time, well in advance. The more demand there is in a certain region the more the supplier can buy at one time. High demand in a concentrated area results in a lower wholesale price for the suppliers and means the overall costs are less for that region. The saving is in turn passed onto the consumers. It is also works the other way… when buying energy in smaller quantities the unit price increases.
Therefore, energy in London costs less than electricity in North Wales because the demand is higher, meaning the wholesale price of energy is lower.
Distributing energy is not quite the same as distributing any other product, it is a difficult process. Energy gets to its destination by travelling through the national grid and local distribution networks. The charges applied to suppliers by these local distribution networks vary from region to region. The distribution networks are owned by different companies who charge different rates for their services. These companies can (and do) charge different suppliers different amounts for the use of their distribution networks.
What it is sensible to conclude is that if you live in densely populated area you will end up paying less, on average, for your energy. What it is vital to remember is that these statistics are average prices not THE prices. This means you could end up paying well above or well below average price for energy. You could live in North Wales and pay less for energy than if you lived in London, you just have to find the right deal! That is why it so imperative to manage your energy bill because you could save money. This is why comparing tariffs and suppliers is so important when trying to get a better price!