Unpacking energy bills and tariffs
A National Literacy Trust research report with Octopus Energy in 2021 showed that 18-to-24-year-olds struggle the most to understand what they are paying for when it comes to energy, and they also don't understand why they’re paying it. Over 9 in 10 people in this age group didn’t recognise key terms that feature in a UK energy bill, words like tariff and kilowatt-hour, compared to the little over 2 in 10 65+ year-olds who couldn’t identify the definitions for the same words.
With this in mind, it is clearly important for us to understand the words and phrases found in our energy bills in order to make better decisions about the energy tariffs you agree to. As part of our Words that Count financial resilience campaign, we enlisted Chris Grimes to help us explain more...
We've teamed up with TikToker Chris Grimes, who is on a mission to help you save money, to help us dig deeper and begin to understand UK energy bills.
Watch Chris' video all about understanding your energy bills. We've added some top tips below to help you lower your energy bill as well as a glossary of the financial terms Chris uses in his video. Once you you've read our glossary of terms associated with the average energy bill, scroll to the bottom of the screen to have a go at our quiz for a chance to test your understanding.
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Watch Chris' video about understanding energy bills
Glossary of terms related to UK energy bills and tariffs
Dual fuel means you get both your electricity and gas from the same company. Single fuel means you get either gas or electricity from just one supplier.
A kWh (kilowatt hour) is how energy is measured. It is the amount (or unit) of energy you would use if you kept a 1,000 watt appliance (such as a small hairdryer) on for an hour. kWh is the standard measurement in all energy bills, whether they’re for gas, electricity or renewable energy like solar power.
What does predicted usage mean in relation to energy bills? Predicated usage is an estimate of how much gas and electricity you are likely to use and is usually based on your previous year. It can also be predicted based on the average amount that people and households in a similar situation to you have used.
A price cap on energy is the maximum cost an energy supplier can charge you for each kWh of energy you use. This is in order to try and provide a fair price for you the consumer even though cost of using energy (gas and electricity) are rising quickly around the world. A price cap is there to protect the customer but you need to be aware that you will still for the energy you use. Find out more about what an energy price cap means from Ofcom.
The standing charge is the amount you pay a company to provide you with energy. A standing charge is a fixed daily amount you need to pay no matter how much energy you use. It pays for things like maintenance work and getting gas and electricity to your home. The amount of energy you use is an extra cost.
Your tariff is the package you have signed up to with your energy company. It is how much an energy company charges you for gas and/or electricity. Energy suppliers offer different packages which will cost different amounts.
The two main types of tariff are called fixed rate and variable. A fixed rate tariff charges you a set rate for energy. On a variable tariff, the costs per unit of energy can vary. So if your energy supplier has to pay more or less money for energy rates, you will as well.
A kWh (kilowatt hour), as we now know, is how energy is measured and so the unit rate is the amount of money you pay for every kWh of energy you use.
VAT ( Value Added Tax) is a type of sales tax which is added to your energy bill and paid to the government. It is a tax that is added onto the price of certain goods and services such as energy bills.
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How to reduce energy bills (UK)
The cost of energy bills in the UK is continuously rising at the moment, which is why we have put together a list of tips and tricks to help you lower your energy bills and save money. Every little helps when it comes to energy bills. We are all increasingly conscious of the impact on the environment but we are also very aware of the rising cost of energy and many of us are looking for ways to keep our energy bills as low as possible. Discover our top tips of ways to reduce your energy bills:
Switch off devices on stand-by mode
If you have lots of gadgets around your home such as wireless speakers, computer monitors, digital TV boxes, switch them off at the plug if you're not using them.
Choose energy efficient appliances
When it's time to purchase a new product, chose those with an “A” rating.
Know which appliances are the most expensive to run
Tumble driers, kettles and toasters are the most expensive, so you should only use them for the amount you need. Thinking about the time of day you choose to use your appliances will also help. It is commonly understood that the least expensive time to use electricity is overnight (from approximately 10pm - 8am). Although this is not always possible, think about running your dishwasher or washing machine, for example, outside of peak times.
Don't leave the water running
A dripping tap can waste more than 5,500 litres of water a year. By leaving the tap running while brushing your teeth you could be spending between £40 and £60 a year.
Use energy efficient lightbulbs
These typically use 25-80% less energy than regular lightbulbs and can last 3-25 times longer!
Wash clothes at a lower temperature
Doing your laundry at 30 degrees celsius rather than 40 can be a third cheaper and could save you up to £52 a year for a family household.
Control your thermostat
Turning down your heating by just 1 degree, could save you up to £75 a year.
Warm Home Discount Scheme
The Warm Home Discount Scheme is a government initiative that allows for one-off discounts on electricity and gas bills to help you make energy payments during this challenging time.