Are you paying too much for your gas and electricity? One of the easiest ways to find out is to look at the Tariff Comparison Rate, or TCR. Ofgem introduced this figure in 2010 as a clearcut way for consumers to compare gas and electricity prices. Here’s a closer look at what this figure represents, and how it could help you save money.
The Tariff Comparison Rate (TCR) is a general figure used to represent the cost of an energy tariff for the typical consumer. To arrive at this average, it will include all discounts, standing charges and unit rates. The TCR also factors in the value of bundled products, whether these are priced at pounds per year or per kilowatt-hour. Essentially, it takes all the different costs that go into an energy tariff and distils them into one figure for comparison purposes.
In this way, the TCR works like an annual percentage rate (APR) used to compare credit cards or other financial products. In the case of the APR, this shows the total annual cost of borrowing money, including all secondary costs as well as the main interest rate. TCR is calculated in a similar fashion. When you’re looking at a long list of plans and suppliers, having a central figure makes these options easier to compare. While the normal price per kWh doesn’t include standing charges and discounts, the TCR does.
A Tariff Comparison Rate is calculated using Ofsted’s standard of medium energy use. A household using 3,100 kWhs of electricity and 12,000 kWhs of gas each year falls under this category, or roughly the average rate for a small family. Naturally, your own usage may be far higher or lower than these figures, which is why a TCR is only meant to be the general approximation of what you can expect to pay for each tariff. Time-of-use meter customers, such as those on Economy 7 or Economy 10 plans, will not be provided with TCRs.
If you’re thinking about switching energy suppliers, you’ll often see fixed electricity prices listed in energy marketing materials. An energy company may claim, for example, that you’ll pay just £850 per year for your combined energy costs. However, there is no flat rate for gas and electricity. What these numbers represent is the per-unit charge for energy sources, and that £850 per year rate is calculated using median figures. As a result, your eventual annual costs could be quite different than the advertised rates.
If your energy usage falls outside of the median figures, how can you accurately compare rates? You might prefer to crank up the heat in the winter or splash out on larger domestic appliances, in which case you’ll pay more than the median. On the other hand, if you are quite frugal with your energy consumption, you’ll pay less. Look at the price per kWh rate to see what the supply itself is costing you, and you can more accurately compare gas and electricity prices.
So, what are the average rates? In 2018, they were listed as the following:
15.8p per kWh for electricity
3.74p per kWh for gas
The TCR takes this a step further, showing you not only the price per kWh but also the additional costs that might be factored into the average tariff. These include the following:
Standing charges – This is a flat rate covering the costs of maintenance, distribution and servicing for your gas or electricity account. The annual standing charges in 2018 were £77.02 for electricity connections and £85.53 for gas. Bear in mind that these will vary widely depending on where you live, as connection costs are higher in rural areas where lines are trickier to install and maintain.
Discounts – There are many different discounts one could benefit from as part of a tariff. Paying by direct debit is one of the easiest ways to get a discount on your energy rates – those paying by credit or prepayment can expect higher fees. Paying for a dual-fuel connection is another way to garner a discount, as is choosing an online tariff.
The Tariff Comparison Rate is a relatively new tool. It stems from Ofgem’s review of the energy market back in 2010. Its aim was to do away with confusing factors like inconsistent standing charges, tiered unit rates, and other issues making energy billing unnecessarily confusing for consumers.
As a result, Ofgem launched the Retail Market Review (RMR) to simplify the energy market. Part of this review was the new requirement that all price comparison websites and energy suppliers provide a TCR for each plan. However, this requirement was rolled back in the spring of 2017. You’ll still find the TCR listed in many cases, but it’s no longer mandatory.
For those suppliers that still use the Tariff Comparison Rate, this information will clearly be displayed amongst the tariff listings. It’s still displayed on many energy comparison sites as well. If you’re interested in finding out the TCR for your current plan, look at your annual energy statement or pull up a copy of your latest energy bill. You should see this displayed in the tariff information label, alongside relevant information like your kWh price and standing charges.
Whether you’re in the market to switch suppliers or simply want to know if you’re on the best rate, you can use the TCR as a comparison tool. Begin by finding out what your current TCR is, and then compare this to other tariffs using an energy comparison site.
Comparing suppliers is easy. All you need to get started is your postcode and a copy of your latest energy bill. With this in hand, you can get a tailored list of tariffs that will be best suited to your needs. When you’re ready to switch, the new supplier will take all the guesswork out of the process.
What’s important to keep in mind is that the TCR is a very general number, and won’t necessarily apply to your own usage levels and region. It’s a good starting point to save money if you’re using it to shop around. If you happen to see a TCR for a different tariff that’s lower than your current figure, you can investigate further with a more in-depth price per kWh comparison using your postcode and annual energy consumption. Plug these numbers into the comparison site for an idea of what you’d actually pay for a plan in your specific region.
There are a few key benefits to figuring out your TCR and using this as a point of comparison. This number allows you to compare tariffs on a like for like basis, but what’s important to remember is that there’s more to an energy supplier than money alone.
The Tariff Comparison Rate might include standing charges and median per-unit costs. It doesn’t account for factors like customer service ratings, fuel mixes, and renewable energy. In short, the TCR doesn’t give you the full picture of what a supplier is able to offer in the same way that a full energy comparison site does.
Another issue to consider is your own household’s usage. Without inputting your most recent meter readings or annual usage figures, there’s no way of knowing how close or far you are from the national median. It’s estimated that only 25% of households fall into the medium user category, which means the majority will be outliers from the TCR figures. While the TCR helps give you a starting point to see which tariffs are more affordable in general, you really need to look a bit deeper to find out if the tariff is right for you.
Designed to be the APR of the energy world, the Tariff Comparison Rate is useful in the sense that it includes both the kWh price of gas and electricity as well as standing charges and discounts. However, because it’s no longer required, you may find it more difficult to find this figure listed. The best, most accurate way to save is to use a trusted comparison site with your own household data.