The energy bill came in at 132 against a budget of 90. Whose fault is it?

The concept is controllable versus uncontrollable variance. A variance is the gap between what was budgeted and what happened. What makes it useful is not its size but its decomposition: the part driven by prices, which Bill does not set, and the part driven by his own consumption, which he does.

Bill splits it. If his consumption this month had matched the budget exactly, the higher market rate alone would have pushed the bill to 115. That portion, 25 euro over budget, is price variance: the same energy-price pressure that pushed the ECB to raise rates in June, not his decision and not his to manage. The remaining 17 euro is consumption variance: he used more than he planned. That one is his. React to the total, 42, and you overreact to the 25 you cannot change while underreacting to the 17 you can.

The ledger records the two separately, because they call for different responses. The 25 of price variance is information: it tells Bill the market moved, and the only action it justifies is revising next month's budget line upward so the number stops surprising him. The 17 of consumption variance is action: shorter showers, the heating off when he is out, the things actually within reach. A budget that lumps them together tells him neither.

The bill still gets paid in full: 132 leaves the account. Bill raises his utility budget from 90 to 115 to absorb the 25 he cannot fight, which drops his monthly baseline from 185 to 160 for good. The 17 he can fix does not belong in the baseline: it lands on August alone, where the surplus comes in at 143. Next month, if he holds consumption to plan, it returns to 160. The annoyance is smaller and it points somewhere.