The ultimate guide to energy bills

Energy Bills

We all know gas and electricity prices can rise at the drop of a hat (they do fall too, but not recently…!) and the last few years have seen collapsing energy firms make headline news. But you don’t need to just sit tight and face a higher bill - there are still ways to save money. It’s all about knowing as much information as possible so you have the tools to deal with a price rise. Here we answer all of your questions, so you know what to do if your provider goes under, how to switch to a new company, how to cut your bill, and how you can save on energy bills.

What affects the price of your bill?

There are two main factors that determine how much you pay - the price of the gas and electricity, and how much energy you use.

The price of gas and electricity fluctuates regularly, and is mainly affected by wholesale markets - basically, how much the energy companies like British Gas have to pay to buy it in the first place.

When these wholesale energy prices rise, inevitably those increases get passed onto customers. Usually there is a lag to this though, as energy providers should buy what they need well in advance - the aim of which is to protect consumers from big price jumps.

The second factor is how much gas and electricity you use - so how long you have the heating, lighting, appliances and other big energy consuming devices turned on for. 

Most households use more energy in the winter months, and energy providers will either increase your bills during that time, or smooth out the higher costs across the whole year - which can be helpful for budgeting.

What’s the difference between a fixed rate tariff and a standard variable tariff?

If you’ve never switched energy providers, or haven’t done so for a long time, it’s very like you will be on a  standard variable tariff, or a default tariff as it’s also known. 

This is the basic price energy companies charge to anyone who hasn’t chosen a specific deal, and when gas and electricity prices increase, your bill will too.

If you have changed energy supplier, or even negotiated with your existing one, within the last couple of years, you may be on a fixed tariff instead. Here the price of a unit of energy is fixed, and this could not change during the length of your tariff.

Once the fixed-rate period is over, it is normally best to switch again, or you end up on a standard variable tariff.

What is the energy price cap?

Back in January 2019 Ofgem, the energy regulator, introduced a price cap which aimed to limit the maximum bill for households who were on a standard variable tariff - effectively protecting someone from being charged a price that was way over the odds.

The amount this is set at is based on energy usage in a ‘typical household’, so it varies a lot for everyone. What it really means is the price of one unit of gas or electricity has a maximum allowed price.

The price cap doesn’t protect household bills from price rises though - when wholesale energy prices increase or decrease, the price cap is reviewed, and can change up or down. It does sometimes delay the effects of price changes though.

Whatever tariff you’re on, if you use more energy your bills will go up.

How to switch suppliers UK

Switching suppliers has traditionally been the most effective way to save money on your gas and electricity prices. Over the past few years, potential savings were around £200 to £300 per year for a typical household if you hadn’t switched in a while.

There are lots of energy price comparison websites that can quickly show you potential savings, and if you do want to switch gas and electricity providers, they will do this for you. You should not have to contact your current supplier and your new supplier will be in contact when it wants your meter readings.

The price you pay will depend on where you live, the size of your house, how much energy you use, and your supplier. Therefore, it’s well worth comparing how much you will pay if you switch. 

When using an energy price comparison site, make sure it is showing you tariffs from all energy providers, and not just the ones who pay it commission to do so, or you might miss out on the cheapest energy bills.

What’s happening with energy price rises in 2021?

Things are a bit different at the moment. The normal state of things is that fixed tariffs are by far the cheapest, and the energy price cap means people on standard variable tariffs don’t get too big a shock when prices rise. However, at the moment things are a bit back-to-front.

Due to soaring wholesale prices, and many energy suppliers going out of business, the cheapest fixed-rate tariffs available for new switchers are generally more expensive than standard variable tariffs.

That’s because the standard tariffs are protected by the price cap. The cap did just increase by £139 per year on 1 October, to £1,277 a year for typical households. But fixed deals are by-and-large far exceeding that.

So right now, sticking on a standard variable tariff is likely to be cheaper. However, the price cap will be reviewed again and the next potential rise will come into force at the start of April, which could push them back to being the most expensive option

This is a much more complicated situation than normal - however, the best action is still taking the time to compare electricity bills and gas usage, to see what the cheapest energy tariff available for you is.

My energy provider’s gone bust, what now?

Over recent years you will have heard news stories about energy providers going bust. But what happens to customers in that situation?

If a supplier does fail, Ofgem, the UK energy regulator, has the job of making sure the supply of energy continues and a new provider takes this over. The household should not be at risk of the energy going off at any point and they won’t lose any money owed to them.   

So first, don’t panic! A new supplier will be appointed to you and it will get in contact to tell you when your new account will be set up. It’s well worth taking your meter readings at this point, so you have them to give to the new supplier when it asks for them.

The new supplier may cost you more, especially if you weren’t on a fixed tariff, and this is the case for most people who have recently been moved after a provider has failed. You are free to switch to a new supplier or tariff as soon as the account has been set up, so always make sure you take your meter readings and compare energy bills to find out if you could be paying less elsewhere.

Our top tips to save on energy bills

You can still save money and reduce energy bills, here are some of our top tips to cut your bills.

  1. Pay via direct debit

    If you are able to, paying by direct debit is cheaper than paying your energy bills any other way. Companies can earn interest on overpayments, and they offer a discount to customers who pay this way. Avoiding paper statements can also save you money.

  2. Don’t leave anything on standby

    Turning off all of your appliances at the plug can save around £35 a year, according to the Energy Saving Trust (EST).

  3. Use the dishwasher, washing machine and kettle less

    Cutting back on just one dishwasher and one washing machine cycle a week can save £16 a year, and only filling the kettle with the amount of water you need saves £6, according to the EST. 

  4. Cut the cost of a new boiler

    If your boiler has decided to break down, and you need a new one, you might be able to get help with the cost. Some suppliers offer discounts on installation costs and there are a number of national schemes you can apply for. There’s a full list at Simply Energy Advice or Home Energy Scotland.

  5. Take control of your heating

    Using a room thermostat can save you £70 a year and cut your carbon emissions by 305kg, turning down your thermostat by just one degree can cut it by a further £55.

  6. Make sure you’re receiving what you’re entitled to

    There are lots of different energy benefits and grants available for those who struggle to pay their energy bills including the Warm Home Discount scheme, worth £140. Find out if you are entitled to help and apply. There’s a handy list on the Turn2Us charity website.

  7. Say goodbye to estimated bills

    Smart meters are free and they enable you to see how much energy you’re using. This information is sent straight to your supplier so you no longer have to manually give meter readings. This means there’s no risk of estimated bills which can lead to paying too much or too little.  Plus, the government estimates that a smart meter could typically help reduce a household’s electricity use by 3 percent and gas use by 2 percent.

  8. Turn off the lights

    It’s simple but it works, and you’ll save £11 a year by turning off unused lights in your house.

  9. Check to see if you’re owed cash

    If you have switched supplies in the last few years, providers are meant to automatically refund you if you’re in credit and if this hasn’t happened (and you switched after May 2019) you may be due compensation on top.

  10. Switch to energy saving bulbs

    Replacing halogen light bulbs with LEDs can save a household £30 a year, says the EST.

Energy Bills FAQs

Why are energy bills increasing?

Average energy bills in the UK are rising because of a huge increase in wholesale prices. Providers are having to pay more for the energy they sell, so they are passing these costs onto customers. 

Which energy companies have gone bust?

What is included in energy bills?

Should I fix my energy bills?

How to compare energy bills?