The amount of information contained in your energy bill can at times feel overwhelming. However, once you understand what all the facts and figures mean, you can end up saving money on your monthly, or yearly, energy costs.
How costs are calculated
Gas and electricity prices are measured in kilowatt hours (kWh) and how much you’re charged is based on the fixed cost of energy per unit consumed. The total of your bill is made up of various costs on top of the energy used.
The standing charge is a fixed fee meant to “cover the costs of keeping your home connected to the grid”. The regulator Ofgem has required providers to print this cost on your bill in an effort to make monthly charges more transparent. You can shop around energy suppliers to find contract that offers a ‘no standing charge’ deal.
VAT is added to the “total cost for your gas and electricity”. At the moment VAT is capped at 5%, however, this could change if the government decides to increase the cap.
Some other costs you might find built into your bill are the environmental fee, intended to assist with “providing more sustainable alternatives to carbon-based energy”, and distribution fees which represent “the cost of getting your energy from the generator to your house”. This means covering the cost of maintaining wires and pipes in your area.
Your bill will state whether your meter reading is estimated (E) or actual (A) meter reading. If you have been given an estimated cost, you will be charged an amount that has been calculated based on your past energy usage, or if that is not available, on national average figures. An actual meter reading is one that you have submitted to your energy supplier or they have sent someone to take a reading from your meter.
It is a good idea to take a meter reading roughly every three months to make sure you aren’t being overcharged. There are now smart meters which not only help you track your daily or monthly energy usage, but also submit this information directly to your supplier.
Your Meter Point Reference Number (MPRN) and Meter Point Administration Number (MPAN) help you “find the energy meters supplying your property”. You might also require these numbers when switching suppliers. Similarly, you’ll want to make a note of the exact name of your tariff. Since so many contracts have similar titles, you’ll need to remember yours if you ever want to switch providers and compare energy deals.
How you pay
There are several ways you can pay your energy bill: monthly or quarterly, via direct debit, or on a prepaid meter.
With the introduction of the energy price cap, an increasing number of energy suppliers are adding fees if you aren’t paying by direct debit. A prepaid meter, on the other hand, will help households that struggle to pay for energy, by allowing you to top up when needed.
Over and underpaying
If you happen to overpay for your energy, you “have the right to a refund”. However, know that this can be a long and tedious process. Usually, it is a good idea to allow your credit to stay with your energy account and use it when your energy bill is higher than normal.
If you owe your energy supplier money due to underpaying, you will likely be back billed. In order to avoid underpaying, make sure to consistently provide your supplier with up to date meter readings and check yourself that you are being charged the correct amount.
If you’re still struggling to understand your energy bill, Citizens Advice has a useful tool that will give you a step to step explanation of each section of your bill.