The Ultimate Cheat Sheet on Energy Bills

Remember when you received that call regarding your energy bills from that chirpy telesales agent and you told them you wasn’t interested and slammed the phone down? Well, the chances are they might had been able to teach you a few things about your bill that your energy company was happy for you not to know.

Despite the continual rises in our costs, even when the energy firms costs have got cheaper, the vast majority of UK households are still buying their energy from the Big Six companies on their standard tariffs. Over a million consumers made the move to smaller firms last year and saved themselves a packet in doing so.

Isn’t it about time you started to understand your TCRs from you kWhs and stopped burning money too?  I’m going to show you how to understand your energy bills better and save money at the same time.

What is a unit rate?

This is the rate that your gas and (or) electric is charged at. Energy is calculated in kilowatt hours, shown as kwh on your bill. If for e.g. your unit rate is 10.9p you will be charged 10.9p for every kilowatt hour you use.

What is a standing charge?

Is a daily rate you pay regardless of usage. For instance, if your property lay empty with no appliances hooked up to the energy supply, you would still continue to pay the standing charge. Some companies offer contracts with no standing charge but their unit rate is usually higher.

What is a tariff comparison rate?

Shown as TCR on your bill. Many see the Tariff Comparison Rate as energy’s answer to the money market’s Annual Percentage Rate (APR). This is because it is designed to provide an easier way to get an indication of how your rate compares to other plans and suppliers.

In the energy market, this is done by giving an effective price-per-unit rate for every gas and electricity tariff — a rate which factors in elements a normal kWh rate wouldn’t, including standing charges and discounts.

Energy Bills

It is worth noting that TCR will always be calculated based on medium energy use— a household that uses 3,100 kWhs of electricity and 12,500 kWhs of gas per year. Keep this in mind if your household falls in the low or high gas and electricity user range.

In general, you should consider TCR as only a guidance to what you are paying or will pay.

Also know that TCR is not yet available for time-of-use meter customers, such as those with Economy 7 and Economy 10 meters.

Where is my TCR shown?

A TCR can be found wherever a gas or electricity tariff is outlined on your energy bills. That means the plan you’re currently on has a TCR, and any plan you may be thinking of switching to will have one as well.

In fact, the point behind the TCR is to compare your current TCR to the TCR of other plans on the market to get an idea of how competitive your plan is. So, how do find these figures?

The TCR will be outlined on energy suppliers’ own websites and on price comparison sites.

You can find your current energy plan’s TCR on your energy bill and on your annual statement.

Ofgem’s changes will also see your bill feature what is referred to as a Tariff Information Label. This label will include your current plan’s TCR, along with other helpful info such as your plan’s actual kWh unit rates, plan end date and standing charge amount.

How to use a Tariff Comparison Rate

Ofgem is very clear that a TCR is not intended to be an exact calculation of what a consumer can expect to pay for an energy plan.

Rather, it is intended to provide an indication of how the costs of one plan compare to another, and ultimately motivate the customer to perform a full-market energy comparison using an Ofgem-accredited price comparison website such as Energylinx, UK Power or uSwitch.

Accredited gas and electricity comparison sites will be able to provide a much more accurate calculation of your expected energy costs because you will be asked to provide information about your consumption and postcode — two factors that greatly impact your energy bills and their costs.

Economy 7 meters

An Economy 7 meter has a night unit rate as well as a day rate. At night, usually between the hours of 12-7, or sometimes 11-6, the unit rate is cheaper.  You often find these in properties which have electric only and those with storage heaters.

Economy 10

Just like Economy 7 meters, these meters come with a cheaper rate at set periods of the day/night. The difference is that these come with one during the day too. The cheaper day rate can differ from meter to meter so always check with your supplier to see when the cheaper day rate is set for. As mentioned above, using timers to bring on appliances in the cheaper periods can really help to cut down costs.

What is a standard tariff?

It is a variable rate of energy, or in plain English, if the cost per unit of energy goes up with your supplier and you continue to use the same amount of energy, so does your bill. If it comes down then your unit rate/bill reduces. Anybody who hasn’t slept for the last decade will tell you the cost only comes down in the warmer months after the winter increases have taken place so effectively it never really comes down– yes your loyalty means that much to them.

What is a fixed a rate?

This means your energy is set at a fixed price for an agreed period of time that you and your supplier contractually agree to. This is usually between 12 and 24 months. N-power were offering a 4 year fix last year and the year before, but after the fiasco they’ve had with billing and customer service over the last 2 years it didn’t turn out to be a very good deal for many of their customers – unsurprisingly they sit at the bottom of the Which? energy supplier league table for customer satisfaction with a paltry overall score of 41%.

Be mindful that a longer fixed term will be set at a higher unit rate than a 12 month fix as the supplier will be offsetting it against the likely price rises to avoid taking too much of a hit on their huge profit margins.

What are early termination fees

Basically a cancellation fee. Most, not all, suppliers will charge you a cancellation fee if you leave before the end of your contract. They can range from £5 right up to £50 per fuel so make sure you check your bill or contact your supplier first before making any attempts to switch.

What is a Personal Projection

This is what your supplier thinks you’ are likely to spend over the course of a year. It is just an estimation and not an exact amount so please bear this in mind. For instance, if you we had an extremely cold winter, or even an extremely hot summer (here’s hoping), you may use more or less energy than predicted by your supplier.

Common misconceptions of energy bills

I will lose supply during a switch

You will not lose your supply whilst your switch is being processed. You gas and electric all comes from the same place, The National Grid. Your energy supplier purchases your energy from the National Grid and then they sell it on to us, the consumer, at a profit.

Your current supplier’s energy is no different to the next company. The only difference to you or me is the logo at the top of our bill and the rate we are charged. Ask yourself this question, would you buy a bottle of milk from a shop selling it for £30 or would you go to another shop selling the exact same thing to get it for £1?

I’ll be better looked after by remaining loyal to one company

If this were true nobody in the country would be on a standard rate of energy. If your supplier really wanted to reward your loyalty they would call you and transfer you to their cheapest available tariff. The reality is they are happy to leave you paying the standard tariff, and therefore paying way more than you need to, until you decide otherwise. The rule of thumb is loyalty doesn’t pay where energy is concerned.

It is always better to be with one supplier for both gas and electric

In most cases but not all. Sometimes when you have prepayment meters it can be cheaper by splitting the energy supply between two suppliers which is why you should always do a comparison to be 100% sure you’re are getting the cheapest possible deal.

I cannot switch if I have arrears on my prepayment meters

You can take a maximum of £500 worth of arrears for each fuel to another supplier if you pay by prepayment meter. Ecotricity have capped this at £200. Ultimately it will be down to the discretion of the supplier, but in most circumstances as long as you meet the criteria above, you can switch to a cheaper supplier.

Top tips to cut energy bills

Fix the price

There is no sense in paying more than you need to, it is expensive enough. Fix down the price and avoid any potential price hikes.

Pay by Direct Debit

You get a cheaper rate and it takes away the danger of running up arrears

Choose an online tariff

Your supplier will offer you a further discount for eliminating paper bills. It is also much easier to upload your meter readings, meaning no waiting in massive queues on the phone or navigating your way through annoying automated services! You also eliminates the possibility of losing your energy bills.

Give regular meter readings

I do it monthly on my online account. It means you never get into arrears and when it comes to switch your actual consumption shown on your bill will be accurate. It also means your energy bills will never be under or over estimated. 

Compare your energy bills and switch regularly

At the end of your contract do another comparison. It could be that your supplier is the cheapest in the area again and you just simply fix down the price for another year with them. If not then switch supplier and remember the golden rule… LOYALTY DOESN’T PAY!

Ask your supplier for your exact annual consumption before starting a comparison

This means that any potential saving will be as accurate as possible. You can also find your annual consumption on your energy bills. Just be careful to check it is an actual amount and not an estimated amount.

Don’t believe everything your supplier tells you

When you attempt to switch you may receive a call from your supplier to try and convince you to stay. You may be even offered a better rate than you saw on the comparison sites. Don’t just take their word for it that this new price is the cheapest out there, have them email it to you and check it thoroughly yourself to be certain. Retentions agents, or whatever fancy equivalent they are known by, are trained to make you stay, whether it is of any real benefit to you or not.

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David Naylor is the editor of the Thinking Thrifty blog. An award winning personal finance and lifestyle blogger, he shows how it is possible to live extremely well for less.
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10 thoughts on “The Ultimate Cheat Sheet on Energy Bills

  1. Where we live, there are two companies but each neighborhood is assigned to one with no option to change. Luckily, they’re both decent.

    That makes examining the bill in detail kind of pointless since we can’t compare and switch, but I do love the part where it compares us to our less-efficient neighbors and gives us a smiley face!

    1. That sucks Julie! Increased competition brings lower prices and generally rises customer experience. Believe it or not, over here many just refuse to switch as it means a change from the norm, even if it is costing the up to £500 a year more. I had to seriously twist my mums arm to do it, when i eventually convinced her she got a deal cheaper by £800! David 1 – Mum 0! Thanks for taking the time to read and comment Julie.

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