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Help understanding energy bills

Fiona Leake
Fiona Leake
  | Edited by Fiona Leake
Updated 4th February 2021

Bills can be confusing and many people often need help with their energy bills. However, understanding your bill completely can be a great way to compare and save money on your energy bills. So, if you’ve ever been confused about your bill, this guide is for you!

Your gas and electricity bills are a breakdown of what you owe in relation to the amount of energy you’ve used and the tariff you are on. Energy bills are sent monthly or quarterly. 

Energy bills explained

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When confronted with your first or even hundredth energy bill, they can be very confusing and you might often just pay without reading it at all! Understanding your bill could help you to save money and pay less for the energy you are using. 

Let’s go over the basics and begin to understand energy bills.

What are energy tariffs?

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Tariffs affect how much you will be paying for your gas and electricity.

There are hundreds of different tariffs on offer in the energy market and understanding which one is for you can be tricky. This is why you should take time to compare different energy tariffs from different suppliers.

There are two main types of energy tariff:

  1. Fixed - this means you will pay the same amount every month or quarter.
  2. Variable - this means your tariff can change. So, one month you might be paying a really good price but the next it could be much higher.

Tariffs are the key thing to compare when switching energy suppliers.

How is energy consumption measured?

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Energy used is measured in kilowatt-hours (kWh). This is equivalent to 1,000 watts of power in a period of one hour.

You can tell how this has been calculated by looking at the following on your bill:

  • Customer - if you’ve provided the meter reading, the letter C for ‘customer’ will be next to the kWh figure.
  • Actual - if someone has come to read your meter, the letter A for ‘actual’ will be on your bill.
  • Estimated - the word ‘estimated’ will be on your bill if the figure is just an estimation each month. Beware as you could be paying for a lot more energy than you are using.

If your bill is unusually high, it could be down to estimated readings. Take your own gas and electricity reading, send this to your supplier and they will revise your bill for you.

How to read gas and electricity meters 

It’s important to know how to read your meters so you can provide updated readings to your supplier and reduce your energy bill.

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How to read digital meters

  1. Read the numbers from left to right.
  2. Include any zeros at the beginning.
  3. Ignore any numbers in red and anything after that red number. Also, ignore anything after a space or decimal point. 
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How to read dial meters

  1. Read all the dials left to right, ignoring any large or red dials.
  2. If a dial is between two numbers, write down the lower number.
  3. However, if the pointer is between zero and nine, write down nine.

How to read your energy bill

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This energy bill breakdown will help you to understand what information will be provided on your bill and what it means:

  • Name of your current tariff - your bill will tell you what tariff you are on. You can use this to compare tariffs and if you are switching.
  • Cost of your energy - energy cost over the past 12 months is included on your bill. This can tell you whether you are overspending or not. The cheapest energy tariffs can be as low as £800 per year. If you are paying a lot more, consider switching.
  • Energy consumption - the energy you’ve used in the past month or quarter will be stated in kilowatt-hours (kWh). Remember, this might not be accurate if no meter readings have been taken, instead, it’ll be an estimate. This cost of this energy will also be stated.
  • Contract details - your energy supplier will outline the terms and conditions of your contract on each bill. This will include your tariff end date and any exit fees.
  • Discount information - your energy supplier is required to provide information on discounts that apply to your tariff.
  • Switching information - energy suppliers must remind customers that they can switch on their bill. Information about switching energy suppliers and advice on how to do it will be on the bill. However, it won’t push switching suppliers, instead, other cheaper tariffs from themselves might be offered. Therefore, don’t rely on this information alone, make sure you do your own research.

Paying by Direct Debit? 3 Warnings 

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Energy suppliers encourage direct debit payments by offering a discount when you do so. This is because suppliers are always guaranteed a payment this way. Keep these things in mind when paying by direct debit:

  1. Check your bills regularly: your energy supplier will estimate how much energy you’ll use a year and divide this by twelve. You could end up overpaying if you aren’t using much energy. Always question any particularly large debits, especially if you know you haven’t been using much energy.
  2. Keep supplying meter readings: it’s easy to forget about your energy bill if it’s been paid each month by direct debit. However, make sure you keep checking meter readings against your bill. If you are overpaying, send the actual meter readings to your supplier.
  3. Don’t be afraid to question: if you think your direct debit is incorrect, contact your supplier and ask for a breakdown of how it's calculated.

Average gas and electricity bill UK

The average dual-fuel variable tariff tends to be around £1,100 a year. This is a very rough estimate as your location, property type and number of inhabitants will affect this figure.

The best average tariff can be around £800 or lower. If you are paying well over a thousand, you should take a look at comparing other energy suppliers. Unless you are a large family home with at least five people, you shouldn’t be exceeding £1,100 a year.

How to compare energy suppliers

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To find the cheapest energy supplier, you need to take a few things into account. We will explain these below to help you compare different tariffs and companies. 

In regards to what suppliers to look at, the UK has the following ‘Big Six’ energy suppliers:

  • British Gas
  • EDF
  • e.on
  • npower
  • Scottish Power
  • SSE

This doesn’t mean that these are the only companies that you should compare, however, they are the most popular suppliers for most people.

Finding the best energy deals

Don’t get overwhelmed when looking for the best energy supplier, focus on comparing the following things:

  • Tariff rates - whilst everyone’s energy usage is different, there are still effective ways of comparing different tariffs. Every supplier must show its Tariff Comparison Rate (TCR). The TCR of each supplier gives you an estimated cost per kWh. Compare this number between suppliers.
  • Exit fees - if you’re on a fixed deal and you leave before the end of the term, you might have to pay an exit fee. Compare how much the exit fees are to help choose your supplier. Variable tariffs don’t charge exit fees.
  • Customer reviews - always take a look through customer reviews of prospective energy suppliers. If it’s a recurring theme that customer service is bad, that supplier might not be your best choice.

How to reduce energy bills

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We have an entire guide dedicated to reducing your energy bills. A summary of some things you can try can be seen below:

  • Check your meter readings - if your bill is unexpectedly high, always check your actual readings to see if you can get your bill reduced.
  • Switch energy supplier - shopping around and switching your energy supplier can save you a huge amount of money by finding the best deal.
  • Turn off appliances on standby - if you aren’t using something, turn it off!
  • Turn down your thermostat - turn the heating down by just a few degrees and you’ll save money. 
  • Buy efficient appliances - energy-efficient appliances can save you a lot of money in the long term.
  • Install a new boiler - upgrade your boiler and you could potentially save hundreds over the long-term.
  • Invest in double glazing - double glazing makes a huge difference and insulates your home against the cold, reducing your energy cost. There may be Government subsidies available.

Energy bill jargon explained

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Here is a glossary of terms that you are likely to find on your energy bill or might hear from your supplier. We will explain each and every term below:

  • Account number: your account number is printed on your bill and is often what you use to set up an online account with your supplier. Reference this number whenever you contact your energy supplier.
  • Credit: in the world of energy bills, credit means that you’ve paid extra and you are owed that money back.
  • Debit: this is the money you owe your energy supplier.
  • Discounts: if you have any discounts applied to your energy bill, it will appear on your bill near the final total.
  • Dual fuel: this is when you receive your gas and electricity supply from the same energy company. Most suppliers offer a discount for dual fuel customers.
  • Economy 7: this type of electricity tariff charges less for off-peak night hours. Night charges tend to be less but ‘night’ is usually classed as between 1am and 8am.
  • Economy 10: this type of tariff gives three off-peak afternoon hours, two off-peak evening hours and five more hours overnight. 
  • E, A and C readings: E means estimated reading. A means actual reading that a professional took. C means customer reading that you supplied.
  • Exit fee: if you switch supplier before the end of your contract date, then you might have to pay an exit fee. This can be quite expensive so always check before you switch.
  • Fixed Monthly Direct Debit (MDD): MDD’s pay the same amount to your supplier each month. However, this doesn’t mean it’s never going to change. Your supplier will have to give you notice if they are going to start charging more or less.
  • Kilowatt hours (kWh): this is what your energy usage is measured in. Suppliers will then charge a certain amount per kWh.
  • Standing charge: this is the daily amount you have to pay to keep your property connected to the grid. Some energy suppliers have tariffs that don’t have a standing charge.
  • Variable Direct Debit (VDD): a VDD gives your energy supplier control over your direct debit. This means that they can change the amount whenever they want without any warning.
  • VAT: on energy bills, VAT is 5% instead of the usual 20%. Bear in mind that most gas and electricity bills show the cost before VAT.

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