Understanding energy bills
If you find your energy bill confusing, then you’re not alone. Less than 50% of adults in the UK fully understand the jargon that energy companies use.
If you’re one of the many people who find energy bills tricky, it might be tempting not to read them at all. However, knowing what to look out for can help you save money in two ways:
- If your energy bill is wrong, then you may find you’ve been charged too much
- If your energy bill is right, then understanding where your money is being spent can help you cut back and save.
On this page, we’ll go through the information you’ll find on a typical energy bill. We’ll make sure to explain any of confusing terms.
Once you’ve decoded your energy bill, our other guides can help you work out:
What’s on my energy bill?
The layout of an energy bill varies between suppliers. However, they should include the following information:
Your bill should be in your name. If it’s addressed to ‘the householder’, this might be because you haven’t set up an account with the energy supplier. If the name or address is wrong, you might have someone else’s bill. Either way, it’s best get in touch with your energy supplier to check why the details aren’t accurate.
Your supplier should try to make this as obvious as possible. They might also give you a date you need to pay by.
A tariff sets out how much you pay for things. There’s a bit more to digest in this section, so we’ll look at that below.
This section might also remind you how you pay for your energy.
This section shows how your energy supplier has worked out your bill. If it looks confusing, check out our What am I being charged for? guide.
To get your bill right, your energy supplier needs to know how much energy you’ve used. To do that, they need a recent meter reading. If they have this, then the meter readings on your bill will say ‘actual’, or ‘smart meter reading’ or have an ‘A’ next to them. On the other hand, if the readings say ‘estimated’, or have an ‘E’ next to them, then that means your supplier has guessed how much energy you’ve used.
If you have an estimated bill, then send your supplier a meter reading. We’ve got guides on reading both gas and electricity meters if you need help. Once your supplier gets a meter reading, they’ll send a more accurate bill.
Your supplier might compare the tariff you’re on with other tariffs they offer. This helps you work out whether you could save money by switching to a new tariff.
Below is an example of what a typical household energy bill looks like and what information you might find on it.
Gas or Electricity Company
1234 5678 910
0123 345 7890
21/2 Any Street
Bill Period 1/1/2018 – 1/4/2018
|Pence Per Unit
|Fixed Charge 98 days @ 26.01p
|VAT @ 5%
|Brought Forward Balance
|Amount To Pay
|0002 1928 285
Like all companies, energy suppliers try to attract customers by offering them a good deal. The tariff is the deal on offer. It’s a contract which sets out how much you pay, and how long for. The tariff will set the unit price and the standing charge.
We’re used to measuring things in grams or millilitres, pounds or pints. Gas and electricity are measured in kilowatt hours (kWh). The unit price is how much a single kWh costs. Your bill will show the price in pence.
Like the unit rate, the standing charge is a set cost. The standing charge covers the cost of supplying energy to your property for one day. It’s a lot like line rental for a phone. There are separate standing charges for gas and electricity. Your bill will show the price in pence.
There are two types of tariff: fixed and variable.
On a variable tariff, the unit price and standing charge can go up or down. There’s a limit on how high your supplier can set the unit price and standing charge. This is known as the energy price cap.
You can leave a variable tariff whenever you want, and you won’t be charged for doing so.
You might also see variable tariffs referred to as ‘standard’ or ‘default tariffs’.
With fixed-rate tariffs, the unit price and standing charge are fixed. They don’t go up or down. A fixed-rate tariff usually lasts for a set time period.
You might need to pay a fee if you want to leave a fixed-rate tariff before your contract ends. You can find out if your contract has an exit fee by checking your bill.
How you pay for your energy
You have an account with your energy supplier. This works a lot like an account with a bank. You pay money into the account. Your energy supplier takes money out of the account to cover your energy costs.
Your account can either be in credit or debit. If your account is in credit, you’ve paid in more than enough to cover your energy costs. If you’re in debit, you owe your supplier money for the energy you’ve used.
There are different ways to pay into your account. Your bill should say which method you have set up. The most common are:
- Direct Debit
- Payment on receipt
Paying by Direct Debit means that a set amount is taken out of your bank automatically. The payment will either come out monthly or once every three months (known as quarterly).
The amount taken by Direct Debit is the same every month. This is because your supplier estimates how much energy you’ll use throughout the year, then divides this amount into equal payments.
Direct Debit is usually the cheapest way to pay for energy. This is because most energy suppliers give you a discount if you choose to pay this way.
A lot of people also find it helpful that their payments are the same throughout the year. Spreading the cost means you avoid large bills in the winter.
Payment on receipt
Payment on receipt means you get a bill for how much energy you’ve used. The bill might cover one month or three months of usage.
Most energy suppliers let you pay by card, cash or cheque.
Payment on receipt means you’ll only ever pay for the energy you’ve used. It means your bills will probably be quite low in summer, but much higher in winter.