Understanding Your Home Energy Bill – What You Need To Know

April 11, 2024 by Admin

Our energy bills are often a huge stressor, regardless of what and how you pay. From fluctuating price caps that have consistently dominated headlines across the UK, to headaches surrounding different tariffs and rates, there’s always so much to consider and often limited time in which to consider it.

We understand that all too well here at Tariff. As a long-standing provider of business energy deals, and a leading force in keeping consumers aware of the latest changes that might affect them and their bills, we’re bringing that level of knowledge to how you power your home.

With our latest deep-dive, we’ll explore everything you need to be aware of when your next bill pops up in your inbox or comes through the letterbox, as well as what the different acronyms mean, and how what you’re paying compares to the average household prices for electricity in 2024.

 

What Does My Home Energy Bill Tell Me?

In a nutshell, your energy bill tells you 3 key things about the energy you’ve consumed, and what you’ll be paying. These are:

• The kind of tariff you’re on (this is usually called either a fixed rate or a variable rate tariff)
• How much gas and electricity you’ve consumed in the period that the bill covers (usually monthly, but can also be quarterly or yearly)
• How much you need to pay for the energy you’ve used, as well as a cost breakdown

For consumers, these are arguably the most crucial things to look for on your latest energy bill. They allow you to not only budget effectively for the power you’re consuming, but also to understand where those costs come from.

Your bill also come with a ream of additional information, too, which includes:

• Information they hold on you as a customer, including your name, address and customer reference number
• A comparison between different tariff types that are available to you (usually between fixed and variable rates)
• Serial numbers for your gas and electricity meters
• How much energy you’ve consumed (usually expressed as kWh)

Let’s explore those 3 key points in more detail, and what they mean for you.

1. Your Tariff

Your tariff is the type of deal or package you have with your energy provider. It’s often the reason why many people choose to switch providers, or to seek out a new deal that’s more suited to their lifestyle and the energy that they use.

There’s commonly 2 different types of tariff. These are fixed rate tariffs (also referred to as “set”, “fixed” or “stable”) and variable rate tariffs (also called “changing”, “fluctuating” or “self-adjusting”). Most customers will be on a variable tariff, as this has quickly become the norm, but it’s crucial to be aware of both.

The key difference is how you’re charged for the energy you use. A fixed rate energy tariff will cost a set amount (decided at the start of your contract) per unit of energy you use, which will not change over the course of your time with your energy provider.

A variable rate energy tariff changes in line with the latest prices set out by Ofgem, the UK’s government-funded energy regulator. This means that, while your energy price could increase over the course your contract, it could also decrease, meaning you end up paying less.

We’ll talk more about how these prices can fluctuate in our next section.

2. Your Gas & Electricity Usage

Relatively self-explanatory, this section of your bill will break down how much energy you’ve used, and over what period of time. It’s usually tailored to your billing period, meaning if you’re billed monthly, you’ll see your usage for that month.

This is measured in kilowatt hours (usually just abbreviated to kWh), which refers to the amount of energy a 1,000 watt appliance will use if it’s continually run for an hour. This is then extrapolated across a variety of different household appliances. Ovo Energy use some great examples, finding that 1 kWh is roughly equivalent to:

• Watching an 80 watt television for around 12 and a half hours
• Running a dishwasher on a 1 hour cycle
• Cooking in an oven for 30 minutes
• Showering for around 6 minutes

While less common now, particularly as we move towards a more sustainable future where natural gas simply won’t be as viable, gas is measured on your meter in cubic metres (m³). This is then converted to kWh for your final bill.

3. Your Total Amount Payable

The area most people immediately look to, the amount you need to pay will usually be quite large section of your bill. There’s a good reason for this. We don’t just pay for the electricity we consume – there are numerous surcharges and maintenance costs that also contribute towards the amount we pay each billing period.

These include:

• Unit Charge – The amount you pay for every kWh of your electricity.
• Standing Charge – This is the cost of staying connected to your energy supplier. You’ll pay for this regardless of how much energy you use.
• TNUoS – Stands for Transmission Network Use of System. This is added as an additional cost for maintenance and upkeep of the National Grid.
• DUoS – Stands for Distribution Use of System. This ensures that there’s minimal disruption in power going from a distribution centre to your home.
• VAT (Value Added Tax) – An additional tax of 20% that’s added to almost all purchases, and that fluctuates with current rates of interest and tax.

All of these combine to create the final price you pay for your energy, and to ensure that electricity is delivered effectively, efficiently and safely to homes across the country. You’ll find out more detail in our guide to understanding business gas bills.

 

How Much Will My Energy Bill Cost Me?

As we’ve touched on, this can depend on the tariff you’re on, how much energy you use (more on that in our next section), and – in the case of some suppliers – when you choose to consume the electricity and gas you do.

According to The Times, fixed rate energy deals are gradually starting to return to the market, but usually only for existing customers of the few providers that are currently in a position to offer them. This includes British Gas and EDF, two of the UK’s major providers.

However, their prices – much like the variable rate deals – are governed by Ofgem’s price cap. As of April 2024, that’s sat at a maximum of £1,690 per year, down by £238 from the £1,928 that it had stayed at between January and March of 2024.

This essentially means that, while prices have been predicted to fall further by leading analytics firm Cornwall Analytics, you can choose to freeze the amount you pay at this current maximum. If you opt to do that, you’ll be tied into the contract for an agreed-upon length of time.

If, like most customers, you choose to stay on a variable rate contract, you’ll pay whatever the current rate of kWh is, up to the current energy price cap (£1,690 as of April 2024). To give you an indication of what that means, here’s a few example household types that you might fall into:

 

 

Bear in mind that these prices do not take into account key variables like VAT, TNUoS and DUoS, but they’re a good approximation of what you can expect to pay for your energy bills as we move into summer of 2024.

 

How Can I Save Money On My Energy Bills?

This is a tricky question, and one that unfortunately doesn’t have a easy answer. Energy bills are a headache for most at the best of times, and it’s natural we’d seek to reduce the impact these have on our personal finances each month.

We’ve actually recently completed a full investigation into how to slash your energy costs, but we’ll also address some of the most impactful changes you can make here too.

 

1. Switch Energy Providers

A tried-and-tested method, and one that’s had proven results across a range of different properties and circumstances, swapping your energy provider can have huge results. Our initial report uncovered savings of upwards of £180 a year for most modern households, with some who’ve never switched reporting cost savings north of £300 annually.

Switching energy providers also prevents you from staying stagnant, and allows you to take advantage of new initiatives that are designed to save the average customer even a sliver on their bills each month.

Major energy provider Octopus, for example, offer a discounted kWh rate for customers who use power during “off-peak” hours (most often between 10pm and 6am), incentivising a more eco-conscious approach to how we consume electricity.

 

2. Invest In A Smart Meter

A revelation in how customers can approach their electricity bills, smart meters allow for much greater control over the power we consume, and when we use it. They’ve quickly become mainstream in their uptake, but there are still some energy providers who’ve yet to offer them to all customers.

In a nutshell, a smart meter allows you to keep a real-time record of the energy you’re using, and where it’s being used. For instance, if you’re leaving appliances running in your bedroom, or you’re wasting power in the kitchen, you’ll be able to act accordingly to save yourself money, and to save energy going to waste in your home.

Plus, as the technology becomes more commonplace, and providers start to offer smart meters as part of their standard packages or as a signing-up bonus, they’re only set to become a more powerful force in understanding how we use energy in the home.

 

3. Consider Upgrading Your Boiler

In our complete guide to boiler efficiency, we revealed just how impactful a change in boiler can be. Of course, there’s an initial outlay involved, but the comparative cost savings quickly recoup any costs that are associated with the new boiler.

A more energy efficient boiler can offer a saving of up to £450 if you’re still using one of the most inefficient boilers on the market with similarly surprising savings of more than £200 if you’re using a D-rated boiler (common in households across the UK).

All of these figures come from the Energy Saving Trust and are government-backed, meaning that the savings are directly linked to the latest figures in energy costs, and offer that additional layer of reassurance.

 

4. Check If You’re Eligible For Home Energy Grants

A lesser-known option for those looking to cut down their monthly and annual costs, grants for your home energy offer substantial cost-saving options for little to no cost. We’ve explored this in much greater depth in our complete guide to home energy grants, but there are several that really do stand out.

These include:

• “Help To Heat” Schemes – The subject of £12 billion in investment, the schemes seek to ensure that homes are cheaper and easier to heat. You’ll find more information on the Government’s page here.
• Warm Home Discount Scheme – Now closed until October of 2024, the scheme offers a one-off discount of £150 on your energy bills. Check your eligibility here.
• Winter Fuel Payment – Reserved for the elderly (those born before 25^th September 1957), this offers up to £600 to help pay your energy bills. Learn more on the Government’s page here.
• Home Upgrade Grant – The HUG scheme has entered its second phase, and offers free energy saving improvements for a variety of homes and Check your eligibility here.

Ultimately, while you may find that your home doesn’t qualify for many of these schemes, it’s worth the small time investment to potentially save hundreds of pounds on your usual annual costs for energy.

 

What Do I Do If I Can’t Afford To Pay My Energy Bill?

An all-too-real consideration for the estimated 6.5 million people across the UK who are living in fuel poverty, it’s a stark conclusion to arrive at when you can’t afford to pay your energy bills. Bleak as it may seem, there are options.

Your first step should always be to inform your energy provider that you’re struggling. New legislation pushed through by Ofgem means there’s a legal obligation for all energy suppliers to offer support to those who are having difficulties paying for their energy costs.

This can come in multiple different forms, but there’s 3 main types:

• Repayment plans and systems (particularly important if you’re in debt)
• Discounts (both one-off and throughout your contract)
• A cap on how much you pay

Some suppliers may also agree to put a brief “pause” on your repayments, which can be especially important if you’ve recently lost your job or gone through significant financial difficulties (such as major upheavals or home issues).

There’s also the option to use a portion of any benefits you’re receiving to alleviate the issues you’re facing with your energy costs. Most providers will be able to do this, but it’s always a good idea to speak to them before opting for this as they may be able to offer grants to ensure you keep all of your money.

If your energy supplier does not offer this support, but you’re still in need of assistance or can’t afford to lose any portion of your benefits each month, the British Gas Energy Trust can still offer help even if you don’t have a contract with them. You’ll be able to check your eligibility for a grant here.

Beyond that, there’s still options available. Advisers for the free Citizens Advice service can also offer more tailormade guidance, and are available over the phone or through their website here. They’ll also be able to advise you on other debts or concerns that might impact your ability to pay for your energy, such as lowering your council tax or getting a referral to a food bank.

Ultimately, though, it’s crucial you speak to someone because there are options available. There’s always the temptation to struggle through in silence, but energy providers are on hand to help out even in the most dire circumstances.