Do you find your energy bills confusing? You are not alone. There is far too much jargon involved so we thought we would explain a few things that might help simplify things.
Fixed price v variable tariffs
Deciding whether to go for a fixed or variable is like betting on the horses and taking out insurance at the same time. It’s a gamble, but it gives you peace of mind. The variable may go up or down in the time you are in the contract but with a fixed tariff you know the standing charge and unit rates you are paying. Don’t forget it doesn’t fix the exact amount you pay, it fixes those unit prices and the standing charge. No one can predict exactly how much energy you will use in the year, even you!
Paying for your energy in equal monthly payments v paying for what you use
Most people choose to pay their estimated annual usage in 12 equal monthly instalments. This means you pay the same every month. If you use more energy in those 12 months, your monthly price will go up the following year to reflect the extra usage and to pay off the previous year’s deficit. If you use less then your energy company will give it back to you. UW automatically put any credit balance in their customers’ accounts in the 13th month, but most other companies want you to ask them for it and we’ve heard stories of people having to ask multiple times. However, if you would prefer your energy company not to have your money up front, then opt to pay for what you use each month. You may need to commit to a smart meter depending on the energy company, but you will definitely need to read your meter at the end of every month for it to be accurate.
Price cap
This is set by Ofgem, the energy regulator, and it only affects customers on the variable tariffs and is to protect them from paying astronomical prices if they don’t switch. The price cap is not a limit on your total bill. It restricts the price per unit (or kWh) and standing charge that energy companies can charge you. When you hear in the media about an annual cost for the price cap (£X per year) this is based on an average usage. And none of us are average, so your actual cost may be lower or higher.
Comparing energy costs
If you decide to look at switching, remember to look at the annual cost rather than the pence per kilowatt hour. This is because the annual cost includes the standing charge which is another variable.
There isn’t a lot of difference between energy companies’ prices these days, but there is a big difference in the extra perks you can get such as other money-saving or environmental initiatives and of course their customer service. So ask your friends who they use.
If you want help looking at your energy bills, we can help.
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