5 things you should know about your electricity bill

Did you know that your electricity bill includes more than just the cost of the electricity?

Put simply, it has 3 main elements

1. What your energy supplier charges for the electricity that you consume. This is the biggest part of the bill, averaging nearly 49% in Europe in 2024.
2. Network charges, which are applied by the companies that manage the electricity grids. Grids transport electricity from where it is produced to where it is consumed. Network charges contribute to the cost of expanding, maintaining, upgrading and managing the grids.
3. Taxes and levies, which are applied by the state usually for environmental reasons, raising public revenues, developing cleaner energy and ensuring security of supply, for instance.

Here are 5 things you should know about your electricity bill:

1. Electricity bills are different in each country

In the EU, household electricity bills differ from one country, or even region, to another. The differences depend on a range of factors

• geography: Electricity grids are essential infrastructure but can be expensive to build and maintain. Where a country is located and where its population lives matters. Large or sparsely populated countries need more and longer power lines. Islands and remote regions need extra infrastructure and, sometimes, back-up sources of electricity. Moreover, geography also affects the location of renewable energy projects and of industry. All these factors impact electricity bills
• energy generation mix: EU countries produce electricity differently. They may use a variety of renewable energy sources such as wind and solar, nuclear, hydropower or fossil fuels like gas or coal. The choice of energy sources affects the electricity price on the market and, ultimately, the electricity bill. The price of building a power plant varies significantly depending on the technology used, with wind and solar now the cheapest options to generate electricity. In addition to investment costs, there are the costs of actually operating the power plant itself. Considering both the investment and operational costs, electricity produced from gas or coal power plants tends to be more expensive than electricity produced from nuclear or renewable energy, in particular wind and solar. Gas and coal power plants have high and volatile operational costs related to the import of fossil fuels and also have to pay a price for the greenhouse gases they emit
• connections to neighbouring countries: Well-connected countries can import and export electricity more easily and efficiently, ensuring that the cheaper - and cleaner - resources are used first. Better interconnections also help to keep electricity prices more stable and increase security. This is important considering the record high prices of recent years
• competition between energy suppliers: A basic rule of any free market has it that when a number of suppliers can compete with one another, each offering different prices, contracts and services, this benefits customers. Each supplier has its own strategy for purchasing electricity - some purchase it in advance, while others buy it closer to real time. This affects how well they can manage sudden changes in wholesale electricity prices. As a result, consumers may have access to a wider range of offers and can choose the contract that best suits their needs and preferences
• taxes and levies: Taxation is mostly a responsibility for national governments. This means that they can apply different VAT rates and levels of EU excise duties to electricity, including reduced ones within the limits of EU commonly agreed rules. But often they also apply national taxes, levies or charges that are added to the electricity bill and are not harmonised across the EU, including taxes and levies with no connection to energy (for example, charges related to public broadcasting)

While all these factors make it more complex to understand the final electricity bill, EU rules give people the right to clear, transparent information on the details of their bills. For example, bills should include information on the contribution of each energy source to the overall energy mix of the supplier, comparisons of the customer's electricity consumption with that of the previous year, information on the end date of the contract, if applicable, and the availability and benefits of switching suppliers, among others.

2. Households can influence their electricity bills

Electricity suppliers offer different types of contracts. In some cases, the price is fixed which means that a household pays the same amount for every kilowatt-per-hour of electricity they use, even if the cost of electricity changes over time. Some contracts have variable prices, for example monthly, while others can be dynamic, meaning they reflect changes in wholesale market prices, for example, hourly.

Almost three-quarters (73%) of households and a significant number of small to medium-sized businesses in the EU are on fixed-price electricity contracts. This can offer a safe option for those who are cautious of unpredictable price rises. However, it also means that they cannot benefit from any short-term drop in the cost of electricity. This is particularly true for consumers who own electric vehicles or heat pumps and are therefore able to shift and adapt their electricity consumption in response to short-term electricity price changes.

There are a number of things you can do to lower your electricity bill.

Switching to a more competitive supplier: Recent estimates indicate that this can lead to average savings of more than €150 per year. Thanks to EU rules, customers should have free access to independent tools in each country that compare offers between different suppliers. EU rules also give customers the right to switch energy suppliers, free of charge. The switch to the new supplier is effective within 3 weeks after signing the new contract. What is more, this period will have to be reduced to 24 hours by 31 December 2026.

Choosing a contract with variable rates and using electricity when it's cheaper: Households can reduce their bills by changing from a fixed price contract to a variable or dynamic price contract that adjusts rates based on wholesale electricity market prices.

In a nutshell, market prices of electricity vary even within a day and depend on the type of energy source used to produce the electricity and the demand. Typically, the more electricity that's needed in a given period, the more it will cost because more expensive energy sources will need to be used to ensure that the demand for electricity is met.

If you can shift your consumption to other periods of the day, you will pay less for it. To reduce bills, households can monitor their consumption and prices through a smart meter and use electricity at times when prices are lower, during the so-called 'off-peak hours'. For example, customers in Sweden on an hourly heating and electricity contract reduced their electricity bills by 42% between 2021 and 2023, compared to a fixed 'flat' price contract. Using electricity when it's cheaper also supports the integration of renewable energy and lowers network costs, which are also part of the electricity bill. However, the benefits of dynamic pricing depend on consumers' ability to shift electricity consumption to when prices are cheaper.

Producing your own electricity: More and more households are lowering their bills by individually generating, storing and/or selling renewable electricity or by participating in an 'energy community'. Through energy communities, citizens, small businesses and local authorities can club together to produce, share, and even sell renewable electricity, for instance from rooftop solar panels. Individual households or businesses that produce and self-consume their own solar energy can save between €260 to €550 per year on their energy bills. Communities of households that collectively produce and share their own wind and solar energy can save €440 to €930 per year.

Using more energy-efficient products and appliances: Simply by switching to more energy-efficient products like fridges, TVs and lights, you use less electricity and save on your electricity bills. In addition, smart appliances can help you consume electricity at times when it is more affordable. EU ecodesign and energy labelling rules set high energy efficiency standards, making them cheaper for consumers over a product's lifetime. These rules are estimated to save every EU household almost €320 on average per year (2024 figures), amounting to about 8% saved on energy bills!

Home improvements like insulation or replacing gas boilers with heat pumps pay off in just a few years, notably through reduced heating costs and energy consumption. Every step and action counts.

3. EU electricity market rules reflect real supply and demand

Electricity is a commodity influenced by the dynamics of supply and demand. If demand is higher, prices rise, and vice versa. As for any other commodity, the market-based pricing of electricity starts with the costs of producing it ('marginal pricing').

Electricity producers bid into the market with offers reflecting their production costs. The bidding goes from the cheapest (renewables, nuclear) to the most expensive energy sources (typically gas or coal). Once the demand is fully met, everybody gets the price of the last producer from which electricity is bought, which might be solar during sunny midday hours or fossil-fired power plants during winter evenings. This ensures that the markets select the cheapest available sources first. Electricity generated from gas is generally more expensive. Gas will set the price when the demand for electricity exceeds the amounts produced by renewable and nuclear generation. Otherwise, some customers would not be getting the electricity they need.

EU electricity market rules do not create high prices by themselves. They help match electricity supply and demand efficiently, in real time. They help identify and anticipate any possible shortages, and reward flexibility as regards both the generation and consumption of electricity. These rules pass on energy costs, especially fuel costs, for example natural gas costs, when they are needed to secure the supply of electricity.

The internal EU electricity market also ensures that electricity flows from where it is cheapest to produce to where it is most needed.

This enables the efficient integration of clean and affordable energy in the electricity system and ensures a secure supply of energy. Shortages in one country can be covered by others, weather-related fluctuations are balanced across regions and grids, and supply investments are used in an optimal way. It reduces the risk of blackouts, smooths out extreme price spikes and reduces Europe's dependence on single suppliers.

Thanks to the internal energy market, it is estimated that consumers save €34 billion annually. With enhanced market integration, this could rise to between €40 -€43 billion by 2030.

4. Reducing the EU's dependence on fossil fuels can prevent future price crises

During the energy crisis in 2022, global natural gas prices reached record highs, in good part due to Russia's weaponisation of its energy exports. This increased electricity bills, since Europe imports significant volumes of fossil fuels like gas, which, as mentioned above, are often used to produce electricity.

Producing electricity from cleaner and home-grown sources of energy, like renewables, helps mitigate the impact of high fossil fuel prices on electricity prices. By putting a price on carbon emissions, the EU Emissions Trading System generates revenues to invest in clean energy and industry and stimulates the uptake of cheaper sources which don't have a carbon price to pay.

Where renewable and nuclear energy are available and sufficient to meet the demand for electricity, they lead to lower electricity wholesale market prices. Clean energy generated 70% of the electricity in the EU in 2025. In particular, wind and solar generated 30% of electricity, overtaking fossil fuels (26%). In Spain, for example, thanks to a rise in renewables, wholesale electricity was almost a third cheaper than the EU average in 2024.

5. The EU is supporting investments in affordable and sustainable energy

The transition to a climate-neutral economy helps make energy affordable for everyone.

To protect vulnerable consumers and help households manage the costs of upgrading their homes, the EU has established several funds and programmes designed to reduce electricity bills by investing in energy efficiency via better home insulation, heat pumps and solar panels, for instance.

The Social Climate Fund: Starting in 2026, this fund will provide €86.7 billion to support vulnerable households and micro-enterprises. The fund will help finance structural investments, like building renovations and the rollout of zero-emission heating and cooling, which directly lower energy consumption and costs.

The Modernisation Fund: This programme supports 13 lower-income EU countries in modernising their energy systems. It is expected to channel up to €57 billion in investments supporting this goal by 2030. As such, it helps to improve the generation and use of energy from renewable sources, as well as the reduction of overall energy use through energy efficiency, including in transport and buildings. Like the Social Climate Fund, it is funded by carbon pricing revenues.

The Just Transition Fund: With a total budget of €19.32 billion between 2021 and 2027, this fund supports regions that have historically relied on fossil fuel activities, such as coal-mining areas. It helps these communities diversify their economies and provides grants for energy-efficient housing and clean energy projects, ensuring that no region is left behind as Europe moves away from coal and gas.

Recovery and Resilience Facility: As part of NextGenerationEU, the Recovery and Resilience Facility has allocated €106.5 billion specifically to energy efficiency. This money is currently funding national voucher schemes for solar panels, heat pumps and insulation. By 2026, these investments aim to save enough energy to satisfy power needs of over 20 million Europeans.

Cohesion Policy Funds: With €20 billion earmarked for energy renovation for the period between 2021 and 2027, these funds target upgrades for at least 723 000 households. Because they are managed regionally, they aim to reach local communities and provide grants for social housing, helping those who cannot afford upfront renovation costs. A proper renovation to insulate a building and improve its energy performance is key to alleviating energy poverty and driving energy bills down.

Conclusion

EU rules help keep electricity bills competitive by ensuring the cheapest (and cleanest) power is used first and by enabling electricity to flow freely across the continent.

The other elements of your bill - taxes, levies and network charges- are largely determined by national choices. This is why bills differ across countries and why wholesale price changes are not always translated into changes in household bills, or are translated, but with a delay of some months.

Over time, EU reforms aim to make bills more affordable and stable, expanding clean energy with low operating costs, making the electricity market function more efficiently and strengthening consumer rights, so that citizens are better protected from sudden price shocks while still benefitting from an efficient and secure electricity system.

Source list for the article

Introduction

Electricity bills differ across the EU

Households can influence their electricity bills

EU electricity market rules reflect real supply and demand

Reducing the EU's dependence on fossil fuels is key to preventing future price crisis