Understanding Your Energy Bill

What Makes Up Your Energy Bill

Every UK energy bill consists of two components. The standing charge is a fixed daily amount you pay regardless of how much gas or electricity you use. It covers the cost of maintaining the connection to your home, meter maintenance, and government policy costs. As of early 2025, the typical standing charge is around 32 pence per day for gas and 54 pence per day for electricity. Even if you use zero energy in a month, you will still owe the standing charge.

The unit rate is the price you pay per kilowatt-hour (kWh) of energy consumed. This is the variable part of your bill and is where your usage directly affects the total. Under the Ofgem price cap, the maximum unit rate is reviewed quarterly. Gas is significantly cheaper per kWh than electricity because gas-fired power stations lose energy converting gas to electricity, and there are additional transmission and distribution costs.

The Ofgem Price Cap Explained

The Ofgem price cap is not a cap on your total bill. It sets the maximum rate a supplier can charge per unit of gas and electricity, and the maximum daily standing charge. If you use more energy than the typical household, your bill can exceed the headline figure Ofgem quotes. The cap applies to customers on default or standard variable tariffs. If you are on a fixed-rate deal, your prices are locked regardless of cap changes, though they may be higher or lower than the cap at any given time.

The cap changes every three months based on wholesale energy costs, network charges, and policy costs. When wholesale gas prices spiked in 2022, the cap more than doubled within a year, prompting the government to introduce the Energy Price Guarantee to limit bills temporarily. Understanding the cap helps you decide whether to accept a fixed deal or stay on the variable tariff.

Economy 7 and Multi-Rate Meters

Economy 7 is a tariff that gives you two electricity rates: a cheaper overnight rate (typically seven hours) and a more expensive daytime rate. It was designed for homes with storage heaters or hot water tanks that heat overnight. If you have an Economy 7 meter, running washing machines, dishwashers, and tumble dryers at night can save money. However, the daytime rate is considerably higher than a single-rate tariff, so Economy 7 only benefits you if at least 40% of your usage falls in the off-peak window. Economy 10 offers a similar principle with ten off-peak hours spread across day and night.

Smart Meters and How to Read Your Meter

Smart meters are the modern replacement for traditional gas and electricity meters. They send readings automatically to your supplier every 30 minutes, eliminating estimated bills and giving you a real-time display showing exactly how much you are spending. There are two generations: SMETS1 meters sometimes lose smart functionality when you switch suppliers, while SMETS2 meters work with any supplier. Your energy company is required to offer a free smart meter installation, and they cannot force you to accept one.

If you have a traditional meter, you should submit readings regularly to avoid estimated bills. Gas meters show a number in cubic metres or cubic feet, which your supplier converts to kWh using a formula that accounts for the calorific value of the gas. Electric meters show kWh directly. For a dial meter, read each dial from left to right, noting the lower number if the pointer is between two digits.

How to Switch Suppliers

Switching energy suppliers takes about 21 days and is managed entirely by your new supplier. Use comparison sites like Uswitch, Compare the Market, or the Citizens Advice energy comparison tool to see available deals. When comparing, look at the total annual cost rather than just the unit rate, as standing charges vary between suppliers. You have a 14-day cooling-off period after signing up with a new supplier during which you can cancel without penalty. Your supply will not be interrupted during the switch, and you do not need to inform your old supplier — the new one handles everything. If you are in debt to your current supplier, you may not be able to switch until the debt is cleared, though some suppliers will accept customers with debts under a certain threshold.