How to Understand your Energy Bills

When comparing energy prices it is wise to have your energy bill in front of you. However sometimes, energy bills can be confusing. In this guide we help explain the different parts of your gas and electricity bills.

What are energy bills?

Utility bills are a paper or paperless breakdown of the energy you have used over a given time period from your existing gas and electricity supplier. It is designed to help you understand the make-up of your existing energy tariff in terms of the unit rate you are charged per kilowatt hour (kwh), any daily fees you pay as part of your Standing Charge, the total amount due for the time period specified on the bill, your energy tariff name, any discounts applicable to you and contact details for your gas and electricity supplier should you have any questions.

Why it's important to understand your energy bills?

It is advisable to understand your utility bill so that you are aware of your energy consumption and to ensure that you are aware of how much you are spending and whether there are cheaper energy deals you should be looking out for.

By understanding your utility bill, you can take action to reduce your energy consumption by implementing some crucial energy saving tips as well as run an accurate energy price comparison through an approved and Ofgem accredited price comparison website to see whether it is in your best interests to switch gas and electricity suppliers.

The different sections of a utility bill

Utility bills can cover a number of pages so we'll attempt to cover the basics with a best estimate of which page they will appear on but obviously this can vary by energy supplier.

On the first page of your gas and electricity bill, you will have your name and address at the top.

There should also be space for your account details and reference number which will come in handy if you ever need to contact your gas and electricity supplier over the phone or online via email or livechat.

Here you may also find an annual estimate, or future projection, of your gas and electricity spend over the next 12-months. If you haven't been supplying meter readings, this may be an estimate so please ensure you provide regular meter readings to ensure your bills are accurate. In addition, there may be information to compare this against your existing energy suppliers energy tariff portfolio to tell you how much you could save on your energy bills.

There will also be the period stated for which the energy bill applies e.g. 1st January 2019 to 31st March 2019.

Next up, you will find information relating to your existing energy tariff. This will include:

• The name of your energy tariff(s) e.g. Standard Variable
• Payment method e.g. monthly or quarterly direct debit
• Tariff end date e.g. when your existing tariff expires
• Exit fees (these are applied if you leave or switch to another deal before your tariff end date)
• Future annual consumption (this is a great bit of information and helps ensure the most accurate gas and electricity comparisons when visiting price comparison sites to compare energy prices).
• MPAN/MPRN (this is the unique number for your gas and electricity meters)

After this, you will have a detailed breakdown of your utility bill to show you how your costs have been calculated. Fasten up for this bit, it sounds complicated but we'll do our very best to make it as simple as possible.

Let's say your utility bill is for a 90 day time period. For each of those days, you may be charged a fixed Standing Charge whether you've used energy or not. NOTE: This is crucial for anyone with a holiday or second home or where energy usage is kept to a minimum. If you fall in to this bracket, you want to consider a No Standing Charge tariff.

So, if you have a £0.25 Daily Standing Charge, this is multiplied by 90-days to give us a Standing Charge fee for the period of £22.50.

Next, we want to look at the units used and the unit rate charged per kilowatt hour which varies between gas and electricity. Remember, electricity is much more expensive to create, and often gas is used in the process, so might be charged at £0.20 per kwh whereas gas is charged at £0.03 per kwh.

For this example, let's take the following usage levels:

Electricity = 500kwh (the annual average is 3,100kwh)

Gas = 3,000kwh (the annual average is 12,000kwh)

This would give us the following calculations:

Electricity = 500kwh x £0.20 per kwh = £100.00

Gas = 3,000kwh x £0.03 per kwh = £90.00

So let's add all this up together:

Electricity

Daily Standing Charge = £0.25 x 90-days = £22.50

Unit Rate Costs = £0.20 x 500kwh = £100.00

Gas

Daily Standing Charge = £0.25 x 90-days = £22.50

Unit Rate Costs = £0.03 x 3,000kwh = £90

TOTAL = £235.00 (exc. VAT)

VAT on utility bills is charged at 5% so add this to the calculation and we've got our total utility bill of £246.75.

And breathe.

Hopefully that wasn't too painful and now we can understand what our utility bill is trying to tell us.

How to lower your utility bills

Being aware of your energy usage is the first port of call. Which devices sap your energy consumption and then reviewing to see if they are necessary or a home comfort that is costing you more than you thought. We have more on this in our energy saving tips guide but as a general rule of thumb the basics apply:

• Only heat the rooms you occupy
• Don't leave lights on around the house
• Improve your home energy efficiencies with insulation e.g. loft and cavity wall
• Ensure you're on the cheapest energy tariff at all times to save money

I hope this guide has been useful and welcome any feedback to further improve the advice we give to our readers.