Energy Bills Explained: Understanding Your Gas and Electricity Costs

Your energy bill shows how much you pay for gas and electricity. Understanding it helps you spot errors, find savings, and choose the right tariff.

What Makes Up Your Energy Bill?

Every energy bill has two main parts:

Unit Rates

The unit rate is what you pay per kilowatt-hour (kWh) of energy you use. This is the variable part of your bill that changes based on how much energy you consume.

• Electricity unit rate: Usually between 20p and 30p per kWh (check current energy price cap levels)
• Gas unit rate: Usually between 5p and 7p per kWh

The more energy you use, the higher this part of your bill.

Standing Charges

The standing charge is a daily fixed fee that covers:

• Maintaining the energy network (power lines, gas pipes)
• Meter readings
• Government policy costs (renewable energy subsidies, energy efficiency schemes)
• Supplier operating costs

You pay this every day, even if you use no energy. Typical standing charges are:

• Electricity: 40p to 60p per day
• Gas: 20p to 30p per day

Your Total Bill

Your bill = (Unit rate × kWh used) + (Standing charge × number of days)

For example, if you use 2,900 kWh of electricity in a quarter (90 days):

• Units: 2,900 kWh × 25p = £725
• Standing charge: 90 days × 50p = £45
• Total: £770

How Energy Billing Works

Direct Debit

Most customers pay by monthly direct debit. Your supplier estimates your annual usage and divides it into 12 equal payments. This usually offers the cheapest unit rates.

At the end of the year, your supplier checks your actual usage:

• Credit balance: You’ve paid more than you used. You can get a refund or reduce future payments.
• Debit balance: You’ve used more than you paid. You’ll need to pay the difference.

Prepayment Meters

With a prepayment meter, you pay for energy before you use it by topping up at a shop or online. Unit rates are usually higher than direct debit, but you can’t build up debt.

Quarterly Bills

Some customers receive a bill every three months and pay on receipt. This typically has the highest unit rates.

Smart Meters

Smart meters send automatic readings to your supplier, so you get accurate bills without estimated readings. They also show your real-time energy use and cost.

How to Read Your Energy Bill

Your bill should show:

1. Account number: Your unique customer reference
2. Billing period: The dates covered by this bill
3. Previous reading: Your meter reading at the start of the period
4. Current reading: Your meter reading at the end (or estimated if you haven’t provided a reading)
5. Units used: The difference between readings
6. Unit rate: Price per kWh
7. Standing charge: Daily fixed fee
8. Total cost: The combined cost of units and standing charges
9. Payment method: How you’re paying (direct debit, prepayment, etc.)

Estimated vs Actual Readings

If your bill says “E” next to the reading, it’s estimated. Submit an actual reading to get an accurate bill. Most suppliers let you do this online or via their app.

Dual Fuel vs Separate Suppliers

Dual Fuel

One supplier provides both gas and electricity. Benefits:

• Simpler to manage (one account, one bill)
• Often cheaper (suppliers offer discounts for dual fuel)
• Easier to switch (one process for both)

Separate Suppliers

You can have different suppliers for gas and electricity. This might be cheaper if you find the best deal for each, but it’s more admin.

Economy 7 and Economy 10 Tariffs

These tariffs offer cheaper electricity at night:

• Economy 7: 7 hours of cheaper rates overnight (usually midnight to 7am)
• Economy 10: 10 hours of cheaper rates (usually overnight plus some afternoon hours)

You need a special meter that records day and night usage separately. These tariffs suit people who:

• Use storage heaters
• Charge electric vehicles overnight
• Run washing machines or dishwashers at night

Day rates are usually higher than standard tariffs, so you need to shift enough usage to night to save money overall.

The Energy Price Cap

If you’re on a default or standard variable tariff, the energy price cap limits how much suppliers can charge per unit. It doesn’t cap your total bill – if you use more energy, you pay more.

The cap is reviewed every three months and changes based on wholesale energy prices. Check Ofgem’s website for the current cap level.

Typical Energy Costs

The average UK household uses:

• Gas: 12,000 kWh per year
• Electricity: 2,900 kWh per year

At current price cap rates, this costs around £1,900-£2,000 per year for a typical household. See our guide to average energy bills in the UK for more detailed breakdowns by household size and region.

How to Switch Energy Suppliers

You can switch suppliers at any time. The process takes about 21 days and your supply won’t be interrupted.

Steps to Switch

1. Compare deals: Use a price comparison site or check suppliers directly
2. Choose a tariff: Fixed-rate (price locked for 1-2 years) or variable (can change)
3. Apply online: The new supplier handles everything
4. Cancel old supplier: Your new supplier does this automatically
5. Final bill: Your old supplier sends a final bill based on your last meter reading

When to Switch

• When your fixed-rate deal ends (you’ll usually be moved to a more expensive variable tariff)
• If you’re on a standard variable tariff and find a cheaper fixed deal
• If you’re unhappy with your current supplier’s service

You can’t switch if you owe your current supplier more than £500, or if you’re in the middle of a complaint about your meter.

Making a Complaint About Your Energy Bill

If you think your bill is wrong:

1. Contact your supplier: Explain the issue and provide evidence (meter readings, photos)
2. Wait 8 weeks: Suppliers have 8 weeks to resolve complaints
3. Escalate to the Energy Ombudsman: If you’re not happy with the response, the ombudsman can investigate

Common billing issues:

• Estimated readings that are too high
• Being charged for energy you didn’t use
• Incorrect unit rates or standing charges
• Bills for a property you’ve moved out of

Reducing Your Energy Bills

The best way to cut your energy costs is to use less energy. See our guide on how to reduce your bills for practical tips on insulation, draught-proofing, and energy-efficient appliances.

You can also:

• Switch to a cheaper tariff
• Pay by direct debit (usually cheapest)
• Get a smart meter for accurate billing
• Check if you qualify for government support schemes

Summary

Your energy bill breaks down into unit rates (what you pay per kWh) and standing charges (daily fixed fees). Most people pay by direct debit for the cheapest rates, but you can also use prepayment meters or pay quarterly. The energy price cap protects you if you’re on a default tariff, but you can often save by switching to a fixed-rate deal.

Understanding your bill helps you spot errors, find savings, and make informed choices about your energy supply.