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Understanding a little more about energy distribution and generation in the UK will help you to appreciate where your gas and electricity come from and all the steps it takes to get energy to your home.

How is electricity produced and distributed in the UK?

In the UK, electricity is produced in a number of different ways. Over the last few years, the amount of energy produced from zero-carbon sources has grown dramatically. In 2014, fossil fuels supplied a whopping 85% of the UK’s energy needs. By 2019, that figure had shrunk to just 43%. The table below shows how the UK’s average fuel mix has changed over the past five years:

Energy source	UK average 2015	UK average 2020
Coal	22.3%	4%
Natural Gas	29.5%	39%
Nuclear	20.7%	17%
Renewables	24.6%	38%

Once this energy is generated, it’s pumped into the National Grid where electricity from all different sources is mixed together. The energy that’s generated in UK power stations is normally at around 22,000 volts. It’s then increased to between 275,000 and 400,000 before being fed into the National Grid. This high voltage is used to allow electricity to travel around the grid as efficiently as possible. If a lower voltage were used, a lot of energy would be lost as heat as it moved through the wires. Raising the voltage reduces the electric current flowing in the wires, and it’s the current that causes heat loss. Once it’s at the right voltage, electricity is sent all over the country via the National Grid. The grid is a vast network of overhead and underground cables that effectively acts as a motorway system to transport energy to every corner of the UK. This electricity eventually arrives at local substations where the voltage is stepped down and the energy prepared for regional distribution.

Who produces energy in the UK?

The electricity we use in the UK comes from a number of different sources including coal-fired power stations, off-shore wind farms, solar farms, and nuclear and gas-fired power stations. This energy generation infrastructure is owned by a number of different companies and organisations. These groups sell the energy they produce to energy suppliers who then sell it on to the end user. While some energy generators are independent businesses, a number of UK energy generators are also energy suppliers. Generating their energy themselves instead of buying it from another company allows energy suppliers to reduce their costs and maximise their profits. The table below shows the wholesale electricity generation market shares by company in 2019.

EDF	24%
RWE	15%
SSE	7%
Drax	7%
Uniper	5%
Intergen	4%
EPH	4%
Vitol	3%
Orsted	3%
ECP	3%
Other	25%

The table below shows the fuel mix for EDF Energy, the UK’s largest energy generator: Coal3.5%Gas9.3%Nuclear66.6%Renewable20.5%Other0.1% The table below shows the fuel mix of RWE npower, the UK’s second largest energy generator: Coal4.8%Gas54.4%Nuclear6.2%Renewable30.7%Other3.9% The table below show the fuel mix for SSE, the UK’s third biggest energy generator: Coal7%Gas65%Nuclear5%Renewable21%Other2%

What are the three main steps in power distribution?

There are three main steps in the power distribution process:

Supply to area – National Grid

The National Grid is a huge network of underground and overground cables that transports electricity across the country. Electricity is taken from the National Grid transmission system and reduced down to around 132,000 volts. It’s then reduced further by local electricity companies to prepare it for distribution. Some big industrial customers require large amounts of electricity. They are sometimes supplied directly from substations at 33,000 volts.

Supply to towns – Distribution Network Operators

Distribution Network Operators (DNOs) are companies that manage regional areas of the grid. There are 14 DNOs in the UK, each responsible for a different section of power lines, substations and customers. DNOs are responsible for managing, maintaining and updating the energy infrastructure in the area they cover. They are also the ones who deal with power cuts, cable repairs and other issues in the system. DNOs take the energy from the National Grid and reduce the voltage before it’s sent out to towns and villages. At this stage, electricity is normally around 11,000 volts. Some industrial customers are supplied direct at this point. The table below shows a list of UK DNOs and their contact details:

Area (code)	Company	Emergency No.	Website
North Scotland (17)	SSE Power Distribution	0800 300 999	www.ssen.co.uk
Central and Southern Scotland (18)	SP Energy Networks	0800 092 9290	www.spenergynetworks.co.uk
North East England (15)	Northern Powergrid	0800 668 877	www.northernpowergrid.com
North West England (16)	Electricity North West	0800 195 4141	www.enwl.co.uk
Yorkshire (23)	Northern Powergrid	0800 375 675	www.northernpowergrid.com
Merseyside, Cheshire, North Wales and North Shropshire (13)	SP Energy Networks	0800 001 5400	www.spenergynetworks.co.uk
East Midlands, West Midlands, South Wales & South West England (11, 14, 21, 22)	Western Power Distribution	0800 6783 105	www.westernpower.co.uk
Eastern England (10)	UK Power Networks	0800 316 3105	www.ukpowernetworks.co.uk
Southern England (20)	SSE Power Distribution	0800 072 7282	www.ssen.co.uk
London (12)	UK Power Networks	0800 316 3105	www.ukpowernetworks.co.uk
South East England (19)	UK Power Networks	0800 316 3105	www.ukpowernetworks.co.uk
Northern Ireland	Northern Ireland Electricity	0345 764 3643	www.nie.co.uk

Supply to homes – Energy suppliers

Before being pumped into homes, and the majority of businesses, electricity is finally reduced to just 230 volts. This allows it to be used safely with our appliances and ensures a reliable supply to properties across the UK. Although energy supplied to UK homes and businesses is delivered by Distribution Network Operators, it’s energy suppliers that most customers will deal with. Energy suppliers deal direct with the end user and set the prices for the gas and electricity they consume.

How does energy production match demand?

Demand for energy can vary significantly. In general, demand is at its highest during the winter months when days are dark and cold and nights are long. However, the National Grid also experiences fluctuations in demand throughout the day as the UK wakes up, goes to work and then heads home again. These surges and lulls in demand are generally fairly easy to predict. This allows the National Grid to get ready for an increase or decrease in demand and ensure there’s always plenty of energy to go round. If there’s a sudden unpredicted surge in demand, the National Grid is able to activate extra energy generation resources to quickly meet the UK’s energy needs. This adaptability means that virtually all households in the UK are able to enjoy a seamless supply of energy.

What is the National Grid and who is it owned by?

The National Grid is the infrastructure that transports energy around the UK. It’s made up of a vast network of overhead and underground cables that transport electricity across the country. The National Grid also includes the UK’s high-pressure gas transmission system. The National Grid is owned by National Grid Plc, one of the world’s largest investor-owned energy companies. National Grid Plc operates in both the US and the UK.

Gas transmission and distribution in the UK

Like electricity, gas is sourced from a few different places before being distributed around the country by the National Grid. At the moment, around 43% of the gas we use comes from British reserves in the North Sea. Another 44% comes from European pipelines. Our remaining gas supply comes from LNG imports. These mostly come from Qatar. These percentages have changed a lot over the past two decades as North Sea gas reserves have been depleted. The table below shows how UK gas sources have changed since 1998:

Energy source	1998	2010	2017
Domestic	99%	51%	47%
Pipline imports	1%	32%	45%
LNG imports	0%	16%	8%

Supply to area - National Grid

The National Grid transports gas around the country. It then enters local distribution zones (LDZ) before flowing through distribution networks. Natural gas has to go through pressure reduction stations before it reaches our homes and businesses in order to make it safe to use.

Supply to towns - Gas Distribution Networks

There are eight Gas Distribution Networks (GDNs) in the UK. Each network covers a different geographical area. It’s the GDNs who are responsible for maintaining the infrastructure in their section of the grid and for delivering gas safely to our homes. The UK’s eight GDNs are owned by the following four companies: West Midlands, North West, East of England and North LondonCadent Gas Ltd+44 800 389 8000https://cadentgas.com/ North East England (including Yorkshire and Northern Cumbria)Northern Gas Networks Limited+44 113 397 5300https://www.northerngasnetworks.co.uk/ Wales and South West England.Wales & West Utilities Limited+44 800 912 2999https://www.wwutilities.co.uk/ Scotland and Southern England (including South London).SGN +44 800 912 1700 https://www.sgn.co.uk/

Supply to homes - energy companies

Like electricity, gas is sold to the end user via energy suppliers. Most companies that supply electricity, such as ‘the big six’ also supply gas. This gives customers a good choice of options when it comes to choosing their preferred energy company.

Who regulates the energy market?

The energy market in the UK is regulated by the Office of Gas and Electricity Markets, better known as Ofgem. Ofgem was created on 1st November 2000. Before the late 20th century, almost all gas and electricity was supplied by British Gas. In 1986, customers were given the right to choose their supplier and the UK energy market began to open up. Within a few years, numerous new gas and electricity suppliers had sprung up and consumers had more choice than ever before. The government created Ofgem in order to help regulate prices and protect consumer interests. Originally, the regulatory body had the power to set maximum prices. This was in order to prevent the cost of gas and electricity from rising too quickly. These powers were removed between 2000 and 2002. It was hoped that competition between suppliers would help to keep costs down, however prices have gone up considerably in the last 20 years, in some cases by up to 60%.

Ofgem

These days, Ofgem is mostly responsible for promoting consumer’ interests. The regulatory body has the power to investigate supplier behaviour and impose fines on suppliers that have breached their license conditions. It is also responsible for promoting sustainability within the energy industry and ensuring that vulnerable customers are offered the correct level of help and support. According to Ofgem, the body protects the interests of the consumer in a number of ways, these include:

• Promoting the security of the UK's energy supply
• Ensuring the sustainability of the UK’s energy supply for future users
• Promoting value for money when it comes to energy tariffs
• Supervising and developing competition within the market
• Regulating government schemes and helping deliver them to the consumer

All of these measures help to improve the UK energy market and provide the consumer with a better, more sustainable service. On top of these measures, Ofgem also publishes in depth information about the energy industry and UK gas and electricity suppliers. This helps to provide consumers with trustworthy and accurate information and allows them to make more informed decisions about their gas and electricity supply.

The Energy Ombudsman - Are energy companies regulated?

While Ofgem is the regulatory body for the energy industry, it’s not the Energy Ombudsman, The Energy Ombudsman is independent and impartial from the energy industry, Ofgem and any consumer groups. If you have made a complaint to your energy company and aren’t satisfied with their response - or if they have failed to respond altogether - the Energy Ombudsman should be your next port of call. It’s the job of the Energy Ombudsman to investigate complaints against energy companies and resolve disputes between suppliers and their customers. It is the duty of the ombudsman to listen to both sides in a dispute, look at all the facts and reach a fair and equitable solution. If you accept the decision reached by the Energy Ombudsman, the energy company in question has to take the action suggested by the body. If you don’t accept the decision, or if you fail to respond to the decision within 28 days, you can no longer take up the solution offered by the ombudsman. However, you are still free to pursue your claim in other ways, such as through the courts. If you feel that the behaviour of your energy company has breached their license conditions, you can also report them to Ofgem. While Ofgem won’t rule on your complaint, they may investigate the company if they find that there is evidence of poor practices.

Can I take an energy company to court?

In some instances, you may want to take things further and take your complaint to court. While you have the right to take your energy supplier to court, it’s important to get independent legal advice before you do so in order to ensure your case has merit and you don’t incur any unnecessary fees. According to consumer watchdogs, energy companies have the worst customer service of all industries. This means that there’s a good chance you’ll be left dissatisfied with your supplier’s issue resolution processes. If you feel your energy company hasn’t adequately dealt with your complaint, the first thing you should do is contact the Energy Ombudsman. They’ll be able to advise you on the other routes available to resolve the situation and find a satisfactory solution. If all avenues have been exhausted, the Energy Ombudsman will intervene to make a decision on your case.

How do energy suppliers work?

In the UK, energy is distributed around the country via the National Grid. Distribution network operators are responsible for maintaining the infrastructure in their specific regions of the country. They are also responsible for stepping down the voltage of electricity to a usable domestic level. However, most customers won’t deal with either the National Grid or their local distribution network operator. Instead, they’ll buy their gas and electricity from an energy supplier. Suppliers sell the energy that’s transported in the grid to domestic and business customers. It’s energy suppliers who are responsible for setting tariffs and taking payment and ensuring their customers’ needs are met. There are around 60 energy companies in the UK, most offer gas and electricity, but some offer just one type of fuel. The largest suppliers are British Gas, E.ON, Scottish and Southern Energy, RWE npower, EDF Energy and Scottish Power. These companies are collectively known as ‘the big six’. Together, they provide around 70% of the energy consumed in the UK.

The latest annual Which? Energy Survey asked 8,000 UK bill payers what they thought of their energy providers, and those from ‘the big six’ frequently ranked poorly - and have done for the last few years - particularly when it comes to customer service.

What is a variable energy tariff?

A variable energy tariff means that the cost of your energy (gas, electricity or both!) will vary, based on the market rate of energy at the time. This doesn’t necessarily mean that your costs will increase and decrease with your usage - as with water bills, for example - but at the discretion of your energy supplier(s), they will often pass on any savings or additional expenses of generating the oil to you, their customers. This is in direct contrast to a fixed energy tariff, where you pay a fixed cost every month for your energy consumption, and it won’t decrease or increase throughout your contract length. For fixed tariffs, this is usually anywhere between one and three years. Unlike a fixed tariff, variable tariffs don’t have fixed terms, contracts or exit fees, so you’re free to switch energy suppliers as soon as a better deal comes along!

How often do variable energy rates change?

Variable energy rates don’t go up and down at random, they are based on global wholesale energy prices. Don’t panic though: changes won’t ever immediately impact your rate. So, if energy prices doubled overnight due to market volatility and global issues, you’re extremely unlikely to have your next bill impacted. Remember that whichever UK energy supplier you pick, they legally have to give you ‘reasonable notice’ before changing your prices. Ofgem (the UK energy regulator) has made it so energy suppliers have to give 30 days notice (at least) in advance of changes taking place, which allows customers to switch to a different tariff or a new provider if needed, before the changes take effect. Similarly, this also means that your price won’t automatically go down immediately if the wholesale costs of energy drop.

The volatility of gas and electricity prices

If you’re wondering how likely it is that your prices will increase or decrease soon on a variable tariff, Ofgem has tracked the volatility of electricity prices since 1st January 2003. Gas and electricity prices and oil prices are very closely correlated, and when oil prices jump up, the cost of buying and supplying oil does too. Energy providers have to pay these increased costs, and significant price hikes are usually passed on in their bills. So, for those on variable tariffs, you may see an increase in your energy bills when the price of oil is high.

For energy in general, there have been some major peaks in oil prices winter 2016/2017 as well as in March 2018 with prices reaching record-highs due to issues with the supply chain, causing demand and supply issues and driving the price up. In April and May 2020, there was a peak akin to one we saw in 2008, which is usually driven by a recession or global issue. 2020, of course, saw the lockdown through a whole host of industries upside-down, and the market price of oil increased during this time as a result. With oil prices now stable since Q3 2020, forecasts suggest that oil prices will continue to increase in 2021 due to the gradual return to ‘normal’ and increase in demand. This, of course, affects the prices that energy suppliers must pay, and will generally be passed on in the form of price hikes to UK households on variable energy tariffs.

Do suppliers always pass on price cuts to their variable rate customers?

They don’t have to. Don’t forget that your unit rates and standing charges aren’t the be-all and end-all. Your bills are made up of various different factors including the cost of supplying energy to your home and region. So global oil prices dipping doesn’t always correlate with those on variable tariffs receiving a smaller bill. Interestingly, data from the Clifford Talbot Partnership shows that over the last 15 years show that there is a strong correlation between the cost of oil per barrel and the costs of gas p/kWH and electricity p/kWh. This is shown particularly in the big peak of 2008, which coincided with the recession, where the price of oil increased quickly. Interestingly, the coronavirus pandemic didn’t have as extreme of an effect, and one of the reasons is that the demand for energy actually dropped considerably during this time, as well as the ability to generate energy. Another period of note is in 2014 when the price per barrel of oil dropped in a very quick period of time. It dropped from around 3$ per barrel to almost 1.5$ per barrel, yet the kWh cost barely changed to reflect this. Although the price of oil is a factor when energy suppliers calculate their costs, it’s not the be-all and end-all, and often they will still have the costs of maintenance, supplying and customer services to pay for even if the cost of oil does drop. This is why significant drops in oil prices don’t necessarily create a similarly dramatic drop in the cost of household energy.  

When will it impact my bill?

It’s impossible to say, as energy suppliers can generally differentiate between a temporary drop or price increase and a longer-term change. However, take comfort in the fact that they have to tell you 30 days before making any changes to the costs you pay

Is now a good time to get a variable tariff?

Because of the global pandemic in 2020 and relatively sudden lockdowns, oil companies across the world had sudden issues with oil demand, with some major players reducing their outputs by up to 10%. This might seem like the perfect time to switch to a variable energy tariff, but key forecasts suggest that prices are likely to increase in the next 12 months due to global recovery post-pandemic. In very important news, while the current Ofgem price cap is in place until February 2021, they have said themselves that the price cap is likely to rise after that point. Which gives energy suppliers the freedom to charge more for their standard variable tariffs - while still remaining compliant under the new price cap.

What are the benefits of a variable rate energy tariff?

If you’re still unclear on the perks, here are some of the highlights of being on a variable rate energy tariff.

• Your prices may drop if the market rate decreases, and you may beat the price paid by equivalent fixed rate tariffs
• No exit fees or cancellations if you choose to switch, giving you the freedom to find a new provider if you’re notified that you’ll start paying more
• Easy to switch energy providers

What are the disadvantages of a variable rate energy plan?

However, there are also some disadvantages of choosing an SVT. [list-custom type="cross"]

• No long-term security in pricing or budgeting ability
• No real protection against price hikes, unless you switch providers before they take effect
• Quite often more expensive than the equivalent fixed rate tariffs, unless the market is at a low point.

Alt: You can compare variable energy tariffs online to find the best deal

Best variable energy tariffs on the market

While there is a well-known price discrepancy between variable tariffs and fixed tariffs - usually more expensive - you may find yourself put on a variable tariff at the end of your contract with your current supplier. While variable tariffs offer flexibility on price when the market is low, they are often the default for energy suppliers, research shows that generally speaking, you’ll be better off on a fixed rate tariff. So be sure to take care when comparing. Do some providers offer exclusively variable energy tariffs? While very rare, there are a handful of suppliers that do, and Bulb is one example of this. While many providers - particularly the Big Six - have an almost insurmountable range of tariffs and different prices paid by all of their customers, Bulb only has one tariff which is called Vari-Fair. This is the only tariff they offer, and it’s updated regularly to reflect the accurate costs of gas and electricity at that time.What happens at the end of a variable tariff contract?Variable tariffs aren’t contracts like with fixed rate tariffs, so you are free to leave your variable tariff whenever you would like to - or when you find a better deal!

The cheapest variable energy tariffs on the UK market

The overall cheapest offers for variable-rate energy can be seen in the table below.

The cheapest variable electricity tariffs on the UK market

If you only want to switch your electricity plan, the following list is for you.

The cheapest variable gas tariffs on the UK market

The following list is for the variable-rate gas tariffs and shows the three cheapest offers.

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