Linda Dodge, energy expert from SaveOnEnergy, provides some top tips on how Brits can understand their energy bills and find an efficient energy supplier.
Understanding your bills:
According to a YouGov poll conducted for Uswitch, 60% of us find energy bills difficult to understand. Take a glance at one and it’s easy to see why – they’re stuffed with complicated jargon and figures. Understanding energy bills is important, however, because it gives you vital information about your own usage. Here’s a breakdown of the basics.
Glossary of common terms
There’s quite a lot of industry jargon on a utility bill. Here’s a closer look at some of these terms, which can help with understanding energy bills.
kWh: A kilowatt-hour (kWh) is simply a unit of measurement. It’s equivalent to the amount of energy used when you run a 1,000-watt appliance for one hour.
Cubic feet: This is another unit of measurement, used to record the volume of gas you’ve used in cubic feet or cubic metres. One cubic metre is equivalent to 35 cubic feet.
Calorific Value: The calorific value (CV) is used to describe the amount of heat generated when a volume of gas is burned away. This can vary by region and will be displayed on your gas bill. This measures how efficiently your gas is used.
Economy 7/Economy 10: These refer to a type of electricity tariff that uses different energy prices for day and night consumption. Electricity used during the night period will cost less than electricity used in the daytime. For an Economy 7 plan, this will cover a 7-hour period, while the Economy 10 structure will cover 10 hours.
Estimated readings: Your energy bill is based on the amount of gas and electricity your household uses. Next to the meter reading section, you’ll see if these readings are estimated (E), or actual (A). Estimated figures are based either on your previous consumption or the national averages. Actual readings are based on the most recent meter readings you’ve submitted.
IGT charges: IGT stands for Independent Gas Transporter, which is a type of network separate to the National Grid. Some small suppliers charge extra for supplying this type of home.
MPAN: The meter point administration number (MPAN) is also sometimes called your “S” or supply number. You’ll find it on your electric meter at home.
MPRN: The meter point reference number (MPRN) is the number assigned to your property’s gas meter.
Standing charges: When you look at a breakdown of your bills, you’ll see standing charges referenced. All plans must include a standing charge according to Ofgem regulations. This is a fixed amount covering the costs of network connection and distribution. Some suppliers charge £0.00 to get around this requirement.
VAT: The standard VAT rate is currently capped at 5%. All energy bills will show unit prices before VAT, so it’s important to include this in your final price if it’s not already factored in.
How energy prices are calculated
Energy bills are broken down into two main types of charges, including the cost per unit of gas and electricity as well as the standing charges mentioned above. When you look at your energy bill, the amount due is based on the amount of energy you’ve used during the billing period. Submitting regular meter readings will keep this information more accurate. Estimated readings may lead to you paying more or less than what you really owe.
1. Cost per unit
The electricity unit price is one major component of your bill. This wholesale price comprises 58% of your electric bill alone. Wholesale energy prices will fluctuate according to global supply and consumer demand. Your energy supplier’s source will also determine the cost per unit, whether it’s an electricity generator, exchange, or gas producer. With fixed price gas and electric tariffs, you’ll be locked in to a set electricity unit price for the duration of your agreement.
2. Standing charges
The other part of your energy prices is due to standing charges. These cover the cost of delivering gas and electricity to your home, as well as maintaining the pipes and wires that make up the national network. Standing charges also include the costs of energy-saving programmes, including government initiatives like the Feed-in Tariff scheme, Community Energy Saving Programme, and Carbon Emissions Reductions Target. All other administrative, sales and marketing costs are absorbed by these standing charges and factored into your final bill.
Why do I have a duplicate bill?
It’s not uncommon to receive a duplicate bill. This can happen due to supplier errors, such as incorrect fees, a mix-up of tariff details and incorrect direct debits being taken. Sometimes meter readings get lost as well, which means they’re not applied to your account. Many of these mistakes go unnoticed, which is why it’s so important to read your energy bills carefully each month.
The other reason why you might receive a duplicate bill is if you’re using estimated billing. When there’s a discrepancy between the amount used and what’s been estimated, you could end up owing the supplier more (or less) money to cover this gap. To avoid unexpected bills like this, submit regular meter readings. This will prevent duplicate bills from being sent out, and you’ll be better able to keep track of your outgoings.
Why are my energy bills so high?
Naturally, your own usage will determine how high your energy bills are to some extent. However, if your bills have suddenly risen, there are a few potential reasons.
1. Your supplier has raised prices
If you’re on a variable rate plan, your energy supplier has the right to raise prices at any time during your contract. They will typically do this in a reaction to a global rise in supply costs.
2. End of a fixed price plan
One of the main reasons why your energy bills may have increased is due to the conclusion of a fixed term tariff. When this type of plan comes to an end, you could automatically switch over to a standard variable or default tariff.
3. Estimated meter readings
Do you regularly submit your own meter readings to the supplier? If not, you’ll be paying based on estimated use. This could be higher than what you’re using, so it’s always worth submitting regular readings.
How can I find a cheaper and more efficient supplier?
Are you paying too much for your gas and electricity? One of the easiest ways to find out is to look at the Tariff Comparison Rate, or TCR. Ofgem introduced this figure in 2010 as a clearcut way for consumers to compare gas and electricity prices. Here’s a closer look at what this figure represents, and how it could help you save money.
The Tariff Comparison Rate (TCR) is a general figure used to represent the cost of an energy tariff for the typical consumer. To arrive at this average, it will include all discounts, standing charges and unit rates. The TCR also factors in the value of bundled products, whether these are priced at pounds per year or per kilowatt-hour. Essentially, it takes all the different costs that go into an energy tariff and distils them into one figure for comparison purposes.
In this way, the TCR works like an annual percentage rate (APR) used to compare credit cards or other financial products. In the case of the APR, this shows the total annual cost of borrowing money, including all secondary costs as well as the main interest rate. TCR is calculated in a similar fashion. When you’re looking at a long list of plans and suppliers, having a central figure makes these options easier to compare. While the normal price per kWh doesn’t include standing charges and discounts, the TCR does.
A Tariff Comparison Rate is calculated using Ofsted’s standard of medium energy use. A household using 3,100 kWhs of electricity and 12,000 kWhs of gas each year falls under this category, or roughly the average rate for a small family. Naturally, your own usage may be far higher or lower than these figures, which is why a TCR is only meant to be the general approximation of what you can expect to pay for each tariff. Time-of-use meter customers, such as those on Economy 7 or Economy 10 plans, will not be provided with TCRs.
How to find out what your TCR is
For those suppliers that still use the Tariff Comparison Rate, this information will clearly be displayed amongst the tariff listings. It’s still displayed on many energy comparison sites as well. If you’re interested in finding out the TCR for your current plan, look at your annual energy statement or pull up a copy of your latest energy bill. You should see this displayed in the tariff information label, alongside relevant information like your kWh price and standing charges.
Is the TCR the best way to save money?
There are a few key benefits to figuring out your TCR and using this as a point of comparison. This number allows you to compare tariffs on a like for like basis, but what’s important to remember is that there’s more to an energy supplier than money alone.
The Tariff Comparison Rate might include standing charges and median per-unit costs. It doesn’t account for factors like customer service ratings, fuel mixes, and renewable energy. In short, the TCR doesn’t give you the full picture of what a supplier is able to offer in the same way that a full energy comparison site does.
Another issue to consider is your own household’s usage. Without inputting your most recent meter readings or annual usage figures, there’s no way of knowing how close or far you are from the national median. It’s estimated that only 25% of households fall into the medium user category, which means the majority will be outliers from the TCR figures. While the TCR helps give you a starting point to see which tariffs are more affordable in general, you really need to look a bit deeper to find out if the tariff is right for you.
Designed to be the APR of the energy world, the Tariff Comparison Rate is useful in the sense that it includes both the kWh price of gas and electricity as well as standing charges and discounts. However, because it’s no longer required, you may find it more difficult to find this figure listed. The best, most accurate way to save is to use a trusted comparison site with your own household data.