Bring a sense of wealth calm to your gas and electricity bills
Is it worth shopping around for household energy deals?
Yes it is! The average price for a Standard Variable Tariff (SVT) from the large legacy suppliers for a typical dual fuel customer paying by direct debit was £1,042, as at 28 November 2020. At the same time, the cheapest tariff basket from the cheapest suppliers was priced at £844. A difference of £198. This data is from the UK’s energy market regulator, Ofgem. So, it really is worth keeping an eye on your energy bills and exploring the best energy options for you.
Which companies are active in the UK gas and electricity markets?
The ‘big six’ energy suppliers in the UK;
Note: OVO Energy acquired SSE plc’s energy supply business in September 2019, replacing SSE in the big six.
Some of the ‘challenger-firm’ energy suppliers in the UK;
According to Ofgem, there were 56 active suppliers of gas and electricity in the UK, during the period January to June 2020. Of these 56 suppliers, 50 supplied both gas and electricity, the remainder supplied either gas or electricity.
These smaller suppliers might also be able to provide you with cheaper energy and should be considered.
Electricity Market (UK – Domestic)
Electricity Supply (UK – Domestic) – Market Share by Company – Q2 2020
Gas Market (UK – Domestic)
Gas Supply (UK – Domestic) – Market Share by Company – Q2 2020
What do I need to know about smart meters?
Smart meters are able to transmit meter readings to energy suppliers and receive data remotely. They can also tell customers how much energy they are using in pounds and pence through an In-Home Display (IHD). This information can help customers manage their energy use, save money and reduce emissions.
In 2016, the first generation of smart meters, known as SMETS-1 smart meters, were officially rolled-out across the UK. Unfortunately, there was a bit of a problem! If you changed supplier, the SMETS-1 meter would stop working, as they weren’t always cross-compatible with other energy suppliers. The smart meter would turn ‘dumb’ and you would be back to the old fashioned routine of meter readings again!
Since 2018, the second generation of smart meters, known as SMETS-2, has been rolled-out across the UK. The benefit being that it offers complete cross-supplier compatibility. With a SMETS-2 smart meter you can change supplier without having to change smart meter as well!
So, if you’re thinking of getting a smart meter installed, it’s worth looking into a SMETS-2 smart meter to avoid these compatibility issues between suppliers. And if you’ve moved into a new property, you might want to check which type of meter you have installed.
What is the energy price cap?
New laws came into effect in the UK from January 1, 2019 that try to ensure consumers pay a fair price for their gas and electricity. The law introduced a price cap that energy suppliers must apply to consumers who are on are on a Standard Variable Tariff or on a Default Tariff (ie. one that you haven’t chosen). Often, the Standard Variable Tariff will be the same thing as the Default Tariff as, in many cases, suppliers will place a customer on their Standard Variable Tariff by default.
The price cap limits the price that a supplier can charge you per kWh of gas and electricity. This price should not be confused with your total bill cost which goes up and down depending on how many units of energy you use.
Fixed-term energy tariffs are not covered by the energy price cap. This is because Ofgem sees theses tariffs as ‘more likely to be good value’. Renewable energy tariffs (standard variable) are also outside of the price cap.
The UK energy regulator, Ofgem, sets the level of the price cap and updates it every 6 months in February and August. The current Energy Price Cap period runs from October 1, 2020 to March 31, 2021.
Should I still have to shop around for cheaper gas & electricity?
Yes. The price cap offers a level of protection if you’re on certain tariffs but you should still check to see if you can get a cheaper deal. As Ofgem point out, ‘Even if you are covered by the cap, you should still ask if you can be on a better deal, or shop around to see if you can save money by switching to a different supplier.’
Energy bills – understanding the jargon:
Use our jargon-busting glossary to help gain a better understanding of your energy bills.
Single fuel plans are contracts that provide one type of fuel only. That being either gas or electricity.
Dual fuel plans provide both gas and electricity under a single contract.
Standard Variable Tariff (SVT)
According to Ofcom, a Standard Variable Tariff is a supply contract with an indefinite length that does not have a fixed term applying to the terms and conditions. It’s an energy suppliers basic offer. If a customer does not choose a specific energy plan, for example after their fixed tariff ends, they are usually moved to an SVT until they choose a new one. Standard Variable Tariff are often the same as Default Tariffs, however, definitions are different between suppliers, so it’s worth asking your supplier.
Default tariffs are a basic tariff from an energy supplier. According to Ofgem, ‘they are typically poor value and more expensive than a non-default, fixed-term tariff which you can choose to switch to.’ Default tariffs are often the same as the Standard Variable Tariff (SVT) offered by an energy supplier.
A tariff with specific terms applying to the contract. Usually these lock-in a price for a year or more. You will usually have to renew your fixed-term tariff after a year, otherwise you are likely to be moved to a default tariff.
A standing charge is a fixed amount paid to your gas and electricity supplier(s) for maintenance and other costs, such as keeping you connected to the gas and electricity supply network. It is usually quoted in pence per day. Also, you usually pay a standing charge for gas and a separate standing charge for electricity, even if you are on a dual fuel plan. Zero standing charge plans do exist but they are often offset by charging higher unit energy prices.
Kilowatt-hour – (kWh)
A Kilowatt-hour, denoted kWh, is a measure of the amount of energy that you have used, that you will find on your energy bills. It is a unit of measurement equal to the amount of energy that you would use if you kept a 1,000 watt appliance running for 1 hour.
Kilowatt – (kW)
A kilowatt, denoted kW, is often confused with a kilowatt-hour (kWh) but refers only to the power needed to make a device work momentarily. For example, an iron on average will require 1,100 watts to get it to work momentarily on high power. If you use the iron on high power for half an hour to iron your clothes, the energy used would be 1.1 kW (1,100 watts divided by 1,000) multiplied by 0.5 hours = 0.55kWh.
Ofgem (Office of Gas and Electricity Markets)
Ofgem is the UK regulator for the gas and electricity industry (excluding Northern Ireland where NIAUR is the regulator). Ofgem acts on behalf of the Gas and Electricity Markets Authority (GEMA) and it is GEMA’s duty to protect consumer interests and promote effective competition wherever possible.
Economy 7 is a UK electricity tariff where you receive cheaper prices for using electricity during ‘off-peak’ hours. The off-peak period, (at night time) lasts for a total of 7 hours, hence the name. Homes using Economy 7 tariffs usually require a special electricity meter to be installed.
Economy 10 is the same as Economy 7 (see above) but the off-peak period lasts for a total of 10 hours.
Smart meters have functionality such as being able to transmit meter readings to energy suppliers and receiving data remotely and are the next generation of gas and electricity meters. They offer a range of intelligent functions. For example, they can tell customers how much energy they are using in pounds and pence through an In-Home Display (IHD). This information can help customers manage their energy use, save money and reduce emissions. Smart meters communicate directly with energy suppliers, meaning customers will get more accurate bills.
The first generation of smart meters installed in the UK are known as SMETS-1. Smart meters have been installed since as far back as 2013 but the official national smart meter roll-out started in 2016. As at 1 January 2021, the majority of smart meters installed are first generation. SMETS-1 stands for Smart Metering Equipment Technical Specification version – 1.
As at 1 January 2021, the UK market is transitioning to installing the second generation of smart meters known as SMETS-2.
The Big Six
In UK energy markets you often hear a term ‘The Big Six’ which refers to the old legacy electricity producers that were privatised during the 1990’s, and which then also started to supply gas. The term specifically refers to the energy supply market and not to the energy generation or distribution markets. Until recently, ‘The Big Six’ referred to British Gas, E.ON, EDF, SSE, Scottish Power and npower. However, in September 2019, SSE plc sold their energy supply business to challenger firm OVO Energy.
Renewable energy comes from sources that are constantly replenishing. For example, energy produced from wind, solar, hydropower, geothermal and biomass. Fossil fuels, on the other hand, are considered non-renewable energy sources, as once they’re used, that’s it. They’re gone!
Vampire energy refers to the energy that is still used when a device has been turned off but remains plugged in.