A guide to understanding your energy bill

Are energy bills unnecessarily confusing?

According to a YouGov poll conducted for uSwitch, 60% of us find energy bills difficult to understand. Take a glance at one and it’s easy to see why – they’re stuffed with complicated jargon and figures. Understanding energy bills is important, however, because it gives you vital information about your own usage. Here’s a breakdown of the basics. 

Why it’s important to understand your energy bills

Your electric and gas bills show more than simply the amount you must pay. They also give you information about your current plan and show you just how much energy you’ve been using across the billing period. Understanding energy bills allows you to verify that you’re billed the correct amount and haven’t built up any debts. Your bill also shows if the energy supplier owes you money, and even if there’s a cheaper tariff you could move to. If your energy use has risen significantly, you can examine your household habits to find out why, leading to greater efficiency – and lower bills. 

What does your bill show?

You may receive a gas bill, electricity bill, or dual fuel utility bill. Energy bills are broken down into those demanding payment (standard bills), or statements showing what you’ve already paid (direct debit or pay-as-you-go plans). Bills might be sent out quarterly, monthly, or even annually according to your preferences. This billing period and date usually appear at the top of the bill. This is where you’ll also find the basic facts, such as your name, address, and customer reference number. Look for contact information for the supplier at the top as well, in case you need to get in touch. 

The bottom of your statement shows what is owed, both before and after VAT. You will see a balance on last statement, which indicates the balance carried over from the most recent bill. Payments received will show any payments you’ve made, and the previous account balance will read as £0.00 if you’ve paid off everything owed from the last billing period. 

Look for a breakdown of your energy prices and usage across the billing period, as well as information about your specific tariff. This will show the name of your current tariff, how you pay for fuel, and the date your agreement ends. Along with this, you’ll see meter readings, the price per unit you pay for your gas and electricity, standing charges, and VAT. This is how your cost is broken down. 

Glossary of common terms

There’s quite a lot of industry jargon on a utility bill. Here’s a closer look at some of these terms, which can help with understanding energy bills. 

kWh

A kilowatt-hour (kWh) is simply a unit of measurement. It’s equivalent to the amount of energy used when you run a 1,000-watt appliance for one hour. 

Cubic feet

This is another unit of measurement, used to record the volume of gas you’ve used in cubic feet or cubic metres. One cubic metre is equivalent to 35 cubic feet. 

Calorific Value

The calorific value (CV) is used to describe the amount of heat generated when a volume of gas is burned away. This can vary by region and will be displayed on your gas bill. This measures how efficiently your gas is used. 

Economy 7/Economy 10

These refer to a type of electricity tariff that uses different energy prices for day and night consumption. Electricity used during the night period will cost less than electricity used in the daytime. For an Economy 7 plan, this will cover a 7-hour period, while the Economy 10 structure will cover 10 hours. 

Estimated readings

Your energy bill is based on the amount of gas and electricity your household uses. Next to the meter reading section, you’ll see if these readings are estimated (E), or actual (A). Estimated figures are based either on your previous consumption or the national averages. Actual readings are based on the most recent meter readings you’ve submitted. 

IGT charges

IGT stands for Independent Gas Transporter, which is a type of network separate to the National Grid. Some small suppliers charge extra for supplying this type of home. 

MPAN

The meter point administration number (MPAN) is also sometimes called your "S" or supply number. You’ll find it on your electric meter at home. 

MPRN

The meter point reference number (MPRN) is the number assigned to your property’s gas meter. 

Standing charges

When you look at a breakdown of your bills, you’ll see standing charges referenced. All plans must include a standing charge according to Ofgem regulations. This is a fixed amount covering the costs of network connection and distribution. Some suppliers charge £0.00 to get around this requirement. 

VAT

The standard VAT rate is currently capped at 5%. All energy bills will show unit prices before VAT, so it’s important to include this in your final price if it’s not already factored in. 

How energy prices are calculated

Energy bills are broken down into two main types of charges, including the cost per unit of gas and electricity as well as the standing charges mentioned above. When you look at your energy bill, the amount due is based on the amount of energy you’ve used during the billing period. Submitting regular meter readings will keep this information more accurate. Estimated readings may lead to you paying more or less than what you really owe. 

Cost per unit

The electricity unit price is one major component of your bill. This wholesale price comprises 58% of your electric bill alone. Wholesale energy prices will fluctuate according to global supply and consumer demand. Your energy supplier’s source will also determine the cost per unit, whether it’s an electricity generator, exchange, or gas producer. With fixed price gas and electric tariffs, you’ll be locked in to a set electricity unit price for the duration of your agreement. 

Standing charges

The other part of your energy prices is due to standing charges. These cover the cost of delivering gas and electricity to your home, as well as maintaining the pipes and wires that make up the national network. Standing charges also include the costs of energy-saving programmes, including government initiatives like the Feed-in Tariff scheme, Community Energy Saving Programme, and Carbon Emissions Reductions Target. All other administrative, sales and marketing costs are absorbed by these standing charges and factored into your final bill. 

How to pay your electric and gas bills

The part of an energy bill that most of us look at first is the amount due. You’ll see your balance displayed at the bottom of the bill, which includes payments already received. You’ll have a variety of payment options. If you have a prepayment meter, you’ll need to pay in advance for gas and electricity, topping up your account with a smartcard, token or key fob. 

Standing orders and Direct Debit are usually the payment of choice for most energy suppliers. In fact, you may get a discount for paying by Direct Debit. These types of payments are arranged through your bank, with a set amount paid each month to the utility company depending on your gas and electric tariffs. 

Most energy bills will also include a giro bank slip at the bottom, showing the amount owed. If you prefer to pay the old-fashioned way, you can submit this back to the energy supplier along with your cheque or cash payment. 

Why do I have a duplicate bill?

It’s not uncommon to receive a duplicate bill. This can happen due to supplier errors, such as incorrect fees, a mix-up of tariff details and incorrect direct debits being taken. Sometimes meter readings get lost as well, which means they’re not applied to your account. Many of these mistakes go unnoticed, which is why it’s so important to read your energy bills carefully each month.

The other reason why you might receive a duplicate bill is if you’re using estimated billing. When there’s a discrepancy between the amount used and what’s been estimated, you could end up owing the supplier more (or less) money to cover this gap. To avoid unexpected bills like this, submit regular meter readings. This will prevent duplicate bills from being sent out, and you’ll be better able to keep track of your outgoings. 

Can I choose paperless billing?

Is your filing cabinet overflowing with utility bills? Most suppliers now offer paperless billing. Many even give a discount for managing bills online rather than receiving paper bills through the post. There are plenty of benefits to paperless billing. Managing your account online means you can sign in to see your electricity and gas usage whenever you like. You can submit meter readings, find past bills to track your energy use over time, and take control of payments. 

However, the downside to paperless billing is that many people don’t bother signing in to manage their accounts. If you need a gentle reminder to pay your bills, the traditional letterbox route may be the way to go. 

Bjorn GriffithDec 9th 2019