How to Read Your Energy Bill: A Simple Breakdown

Energy bills look more complicated than they actually are. Most of the confusion comes from the way suppliers lay things out and the amount of jargon they use. Once you know what the key numbers mean, it’s pretty quick to check whether you’re being billed correctly.

The Two Charges That Matter

Everything on your bill comes back to two numbers.

The standing charge is a daily fixed fee you pay whether you use any energy or not. Think of it as the cost of being connected to the grid. Right now, under the Q1 2026 price cap, it’s 54.75p per day for electricity and 35.10p per day for gas. That’s about £328 a year just in standing charges before you’ve used a single unit.

The unit rate is what you pay for each kilowatt hour (kWh) you actually use. Currently that’s 27.69p per kWh for electricity and 5.90p per kWh for gas, though it varies a bit by supplier and region. The more energy you use, the more this part of the bill grows.

That’s really it. Everything else on the bill is just these two numbers multiplied out over a billing period, plus 5% VAT.

Estimated vs Actual Readings

This is where most billing problems happen, and it’s worth understanding. Your supplier either works from an actual meter reading or an estimate. Actual readings come from you submitting them, your smart meter sending them automatically, or (rarely these days) an engineer visiting. Estimates are the supplier guessing based on your past usage.

Look for an “E” next to the meter reading on your bill. That means it’s estimated. The problem with estimates is they can be wildly off, especially if your circumstances have changed - maybe you’ve started working from home, or the house has been empty for a few weeks. We’ve seen cases where estimates are hundreds of pounds out.

If your bill is based on an estimate, it’s worth taking five minutes to submit your actual reading. Your supplier’s app or website will let you do this, and they should adjust the bill accordingly.

Gas Bill Conversions

Gas bills have an extra step that confuses people. Your meter records usage in cubic metres (m³) or cubic feet (ft³), but you’re billed in kWh. The conversion involves multiplying by a calorific value (usually around 40) and a correction factor (1.02264). Your bill should show this calculation somewhere, though it’s often buried in the small print. You don’t need to check the maths every time, but it’s worth knowing why the numbers on your meter don’t match the numbers on your bill.

The “Estimated Annual Cost”

Ofgem requires suppliers to show an estimated annual cost on every bill. It’s supposed to help you compare deals. The catch is it’s based on typical usage patterns, not yours. If your household uses more or less than average, the number won’t be accurate for you. When comparing deals, always use your actual kWh usage - it’s a much better guide than any estimated annual figure.

Spotting Errors

A few things to watch for. First, compare the meter reading on your bill to your actual meter - digit errors happen, and a single wrong number can mean hundreds of pounds difference. If you’ve got a smart meter but you’re still getting estimated bills, something’s wrong with the connection between your meter and the supplier.

There’s also a back-billing rule worth knowing about. If your supplier undercharged you (their fault, not yours), they can only bill you for the last 12 months of the shortfall. Anything older than that gets written off. Some suppliers try it on with this, so it’s worth checking dates if you get an unexpectedly large catch-up bill.

And always make sure you’re on the tariff you actually signed up for. We’ve heard from people who switched deals only to find their supplier put them on something different. Check the tariff name on your bill against your confirmation email.

Direct Debit Balances

If you pay by direct debit, your monthly payment is smoothed across the year. You’ll build up credit during summer when you use less, and eat into it during winter when the heating’s on. This is normal.

What’s not normal is your supplier sitting on a large credit balance and refusing to lower your payments or refund the excess. If you’re consistently in credit by more than a month or two’s worth of bills, ask for a reduction or a refund. They’re not supposed to hold your money without good reason.

If Something Looks Wrong

Take a photo of your meter, compare it to what’s on the bill, and ring your supplier with the correct reading. If they won’t sort it, or if the dispute drags on, you can take it to the Energy Ombudsman. Keep your old bills for at least 12 months - you’ll need them if there’s any argument about what you’ve used.