Understand your gas bill
In today’s Whiteboard Friday, find out with our energy expert Guy Thompson, who you pay and what you pay for when you pay your gas bill.
“Hi and Welcome to Whiteboard Fridays with MyUtilityGenius. Last week we had part 1, which was your electricity. Today, we have part 2 which is gas. So we start with you down here in Cornwall. Corwall, it is sunny, nice; that’s why you wanted to live there. Aunt Nessie, up here in the North, in Middlesborough: not so nice. What benefit that she has and you don’t: she is very close to the North Sea. North Sea, that’s where all our gas come from.
To get it from the North Sea to you, you have got pipelines that go all over the country – excuse the drawing: pretty poor – own by National Grid, to get the gas over to you in the South West. Rule of thumb, the further South West you are, the more expensive your gas is because it costs a lot more to transport it to your home.
So, Transco and the National Grid own the transportation system. Where does the gas come from? The gas come from from the North Sea, that’s BP, Shell and other Oil majors. In addition to that, it is also coming from Europe: The Netherlands, Belgium through bigger pipelines. Ultimately, the far end of Europe – if you can call it Europe like the Eurovision does – we have the Russians. The Russians are shipping gas through Europe, all the way to us through pipelines.
So we have got BP and Shell pulling it out from the ground of the North Sea and we also have nowadays something called LNG (liquefied Natural Gas). LNG only comes to us if we are ready to pay for it. If we are not prepared for it someone will like for example the Japanese, who might be prepared to pay more for their gas. If something like Fukushima happens and you have a complete shut down of all the Nuclear power, they ll start to buy a whole chunk of gas. The only way we could get to buy any gas: we are going to start to pay more money for it. So that in a nutshell is where gas come from and how it gets to you.
Now the reality is that you don’t have a personal relation with BP or a personal contract with the Russians – unless you have some connections at Chelsea Football club. What you do have is a contract with the Big 6. What do the Big 6 do? They take cash and they are shunting it to these guys, these guys… and they are also paying the transporters (with your standing charge). The transporters, like National Grid, are regulated by OFGEM as we saw for National Grid with the Electricity as well. So this is regulated, this is a tradeable market.
The only other thing to know on gas is how much gas you use whether you are in Cornwall or in Aberdeen is a function of the weather. Typically, you burn gas when it is cold and you don’t burn gas when it is warm. Suppliers what they tend to do is they really like is you to pay by Direct Debit. The reason why they like Direct Debit is because they can simply get you to pay your gas as soon as possible after you have used it. You may use nothing between May, July, August… Therefore, they are really keen to chasing you for your money between February, March, April…
That is – put in a very simple format – The Gas Market. What we will look at next week is the suppliers, how do you interact with them, how you can get the best deal out of them…
Until next week, see you later…”