Paying the lowest amount for energy involves switching suppliers regularly – and ensuring you pay the correct amount means providing accurate meter readings.
Most energy customers build up credit from April to October when heating is turned down and use this during the winter when our homes need more heat.
But energy firms are taking more from customers than required. Research from uSwitch in May 2018 found 11 million households were owed a total of £1.3 billion. 40% were owed an average of £121 and 8% more than £200.
Automatic refunds are still not standard, even when you switch suppliers. The research discovered 54% of consumers had to chase their supplier for a refund instead of receiving one automatically.
By providing accurate meter readings at the start and end of your contract you should pay the right amount for your gas and electricity in the end.
The way you’re billed by energy suppliers can be confusing because you usually pay a regular monthly direct debit, which often has little direct link to actual usage which varies throughout the year.
But paying this way means you have a fixed outgoing that helps with household budgeting. When you provide meter readings, your supplier generates accurate bills based on actual usage, allowing you to see the real state of your account and if you’re paying too much or not enough.
You should try to provide accurate meter readings at least four times a year and ensure that your energy supplier (or suppliers) use them. Then your monthly direct debit will be adjusted closer to the amount of energy you actually use.
If you never provide meter readings, which according to uSwitch, 1.4 million households don’t, then you’ll be paying estimated bills. This means you could be in for a nasty shock when your actual bill is issued if you are underpaying – or if you’ve been overpaying you are allowing your utility supplier to hold your money you don’t really owe.
Two houses on the same road using the same amount of electricity and/or gas can pay a significantly different amount of money for their energy. Your supplier, tariff, and whether you’ve switched recently can all have a major impact on your energy bill.
If you’ve never switched suppliers you will likely be on a standard variable rate (SVR) tariff, paying hundreds of pounds more than the cheapest tariff available. If you have switched but the promotional period has ended (usually after 12 or 24 months) you’ll be automatically moved to a SVR tariff where your rates are regularly increased.
For instance, British Gas increased its SVR tariff by 5.5% on May 29 – an increase of about £60 for most homes. EDF, Scottish Power and Npower all have similar increases planned for June.
Suppliers rely on the apathy of consumers staying on the same SVR tariffs to make large profits. But, you don’t have to be at the mercy of these suppliers. Take action, compare tariff costs across the whole market and switch to the best deal in your area. It doesn’t matter which company logo is on the bill: the gas or electric that arrives at your house is always the same.
The Energy Switch Guarantee means you can expect a safe, reliable switch to a new provider in 21 days. If you have never switched suppliers you could save up to £300 a year.
Now read about how to switch current accounts
You can save money by being on the right tariff. The cheapest deals are available if you manage your account online and opt for paperless billing. Here’s a list of the different energy tariffs available in the UK.
These are usually the most expensive option, but they’re flexible: your bill could go up or down in line with supplier price increases/decreases, and you can leave at any time without paying an exit fee.
The price of the standing charge and rate per kilowatt hour (kWh) for your gas and electricity doesn’t change for the length of the deal. You are protected from price rises – but if prices are cut you won’t benefit. If you leave before the end of the fixed rate deal, you will usually have to pay an exit fee.
This is when you get gas and electricity from the same supplier. The cheapest deals are often reserved for dual fuel customers and it can be easier to deal with just one supplier.
The cheapest deals are reserved for online tariffs where you receive bills and correspondence via email, and submit meter readings and manage your account online.
There are other tariffs, including pre-payment tariffs which are an expensive option but make it easier to manage your finances because you ‘pay as you go’. Green energy tariffs are rarely the cheapest, but they’re not always the most expensive either. If you opt for a green energy tariff, the supplier will usually promise to buy renewable energy generation from the National Grid equal to your energy usage.
Energy bills are complicated and despite efforts from the regulator, Ofgem, to force utility providers to simplify bills as well as reduce the bewildering array of tariffs, bills remain difficult to understand.
In essence, like most bills, you have an opening balance, then add the charges for the period, subtract the payment you’ve made in the billing period, and end up with a closing balance.
The charges are made up of the amount of kWh used in the period multiplied by the rate. For instance, 540.4 kWh x 11p = £59.44. You then add on the daily standing charge for the period, for instance 31 days at 18.01p per day = £5.58. On top of this VAT is charged at 5% on energy costs, so this bill total is £65.02 + 5% VAT (£3.25) = £68.27.
The main charge, the usage, may be estimated if you haven’t provided a meter reading. When you provide one, the next bill will be calculated based on accurate usage and will show the correct charges and bring your account up to date.
Energy companies regularly make mistakes. Ofgem has launched 76 investigations into the practices of energy firms since 2009 into issues ranging from pricing errors to tariff irregularities, covering all the major suppliers and most of the minor ones too.
Common billing errors include bills not matching accurate meter readings, bills not added up correctly, suppliers refusing to refund credit balances, suppliers applying the wrong tariff details to accounts, and duplicate charges where suppliers apply their own estimated meter readings and the ones customers have actually supplied.
If you think your energy supplier has made a mistake, investigate, get your facts straight, contact them and try and get it resolved. If they don’t rectify the mistake to your satisfaction then complain to the Energy Ombudsman.
Now read our guide on managing money and bills in a shared home
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Last updated: 30 May, 2018
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