Please can somebody explain energy tariffs to me like I am an idiot (because I am).

[QueenHilda]

Okay so let me first tell you what I think I DO understand:

I know that there are various tariffs available including fixed, variable and tracker.

I know that there is a price cap, which refers to the maximum amount a provider can charge per kwh and also for standing charge. Currently, according to google, this is 23.54p for kwh of electricity and 65.93p standing charge. (This is confusing though because different websites say different things. So one for example says the price cap is £1717 a year. How am I supposed to know how many kWh that is?!)
I am only interested in electricity because I don’t have gas.

I know that the direct debit is just what you pay into your account with the company, due to their estimations of usage, but does not necessarily reflect what they will charge your account, because this will depend on actual usage. I am currently in £180 credit with my supplier, which I’m happy about because we’re heading into winter.

My situation:

-I only have electricity in my house.
-It is a small 2-bed house and I live alone.
-I am on a flexible rate with Octopus (ie not fixed).

What I do not understand:

Why do people say that it’s only worth fixing if a quote is something like 10% under the price cap? What does that actually even mean? What number is it? We know what the price cap is, so why not just do the maths for us - anything under 21p per kwh is a good rate (or whatever). I just don’t understand what sums I am supposed to do.

And what it boils down to I suppose is whether fixing with Octopus for 15months for electricity-only at 64.88p a day standing charge and 31.39p a day is a good idea?

It seems to me it is not, because that is a LOT higher than the price cap, and I thought that the price cap was the maximum anyone can charge?!
Nevertheless, my quoted monthly direct debit is lower under the fix than it is currently.

I’m just so confused ☹️ please can somebody help?

Do you know what your usage is for a set period? I've just renewed my tariff for example so I could see on my account what my actual usage was of both gas and electric for the last year.

I used that to work out what my ongoing costs would be.

I went through Quidco, to a price comparison site, so got £30 for doing the comparison and choosing a provider.

Then just made a quick table with current price per unit and standing charges, current provider's best offer, the new CAP price, and then a few others for comparison.

I like to fix btw, especially if there isn't a fee to change which there often isn't. My new tariff was less than I currently pay, and less than the new CAP by a little.

The energy price cap only applies to standard variable tariffs (the default tariff when your contract runs out). You can opt to pay more on a fix.

If you get your most recent bill it will tell you how many kWh you use for a month usually.

you can then use that figure to multiply by the electricity price on tariffs to see what you’d pay each month or quarter depending how you pay

price cap info
From October
Unit rate: 24.50p per kWh
Standing charge: 60.99p per day

now
Unit rate: 22.36p per kWh
Standing charge

so the price octopus are quoting is higher as it’s 31.39 - 24.50 =6.89p more per unit but is fixed so if the next price cap in April is more than the fix rate ie the price cap was 32p your 31.39 would be less so you will save if that makes sense.

I'd fix

My little table.

SC a little more than cap but units ok

The price cap also varies by region, there isn't a national price.

As someone said earlier, your provider can tell you how much you used last year. I'm also with octopus and they are incredibly transparent.

At the top of my bill it says my ‘estimated’ annual usage is £1055 but I can’t see my ACTUAL annual usage. And when prices keep going up and down all the time I don’t know how useful an ‘estimate’ is?

I am with Octopus but I am just so flummoxed.

I am not very good at maths 🥺

Some good info hear plus links to fixed tariffs available at the moment www.moneysavingexpert.com/utilities/are-there-any-cheap-fixed-energy-deals-currently-worth-it/

Do you have an account you can log in to? If you can take your reading and compare to past ones that'd help.

Realistically that doesn't matter as much as understanding what the unit prices etc are and comparing them

That sounds like you aren’t giving meter readings? On the bill it should have numbers to show the readings from the last bill to your current bill. If there is an e next to the number it’s not an actual reading

to take a reading you need to check your meter. Then ask for a new bill to make sure you are paying for your actual usage and then you can work out the best deal

but it’s the unit price that’s important. The cheaper the unit price the less you will pay for your energy

Thank you for sharing, really kind of you, but I just don’t understand what I’m looking at I’m sorry.

I get that it might be difficult to explain to me on a forum, but is there an online course or something? Even Martin Lewis is not clear to me.

Here

@QueenHilda if you go on the Octopus app and select My Bills then if you look at one of them and scroll down to page 2 on the right it should give you your estimated annual usage in kwh I'm assuming you are submitting regular readings. I have chosen to take their fix for 15 months as they aren't charging to change the fix if prices drop again.

Call Octopus and talk to them.

I'm also with them and they sent me an email a few days ago about price changes. I haven't read it properly yet but I think it said that you can fix but move onto a different tariff at any time if you want. So fixing with Octopus doesn't necessarily mean you're tied to that tariff for 15 months.

They also have a projection thing somewhere, I think. I'm sure mine shows that they estimate I'd be better off on variable, so I don't plan on changing. I'm also currently £400 in credit, though expect that to be wiped out over winter as it costs so much to heat my house.

But I find them pretty helpful if I have a question, so I would just ask them if they can help you.

As you are with Octopus - fix now. They have a rate on offer with no tie in period.

If prices increase by 10% in Oct as predicted, you will be onto a winner.

When they fall, jump tariff.

The reason it is only worth fixing if the rate is a certain % is because it is a gamble.

Fixed rate tariffs are dearer than flexible rate at the point they are offered. And often, once you are on them, there is a penalty to pay to get off them.

So - you gamble on rates rising in future. Then you have the benefit of being locked onto your lower deal.

If rates fall, you are locked in on a higher deal.

Check out martin lewis website and he usually has advice on what the good deals are.

With octopus though- fix. If the fixed deal is still there!

You pay more on a fixed rate, because it gives you certainty over the prices for a year (or more). So it's a bit of a gamble, but some people prefer to know exactly what the rate is for the whole time, rather than having it change often.

You can then choose a balance between unit rate and standing charge, depending on your personal circumstances. If you live alone and don't use much energy, you might prefer to have a higher unit charge but a lower daily standing charge, because that will work out cheaper overall. If you had a family, you might prefer to pay more as the daily standing charge, and less per unit, because you will use a lot of units. This is why your estimated usage (not money, but actual usage) is helpful, so you can make this decision. It should be available on your bills somewhere.

Think of it like a gym membership or something. You could pay £40 per month plus £2 per visit, vs £10 per month plus £5 per visit. If you only went twice a month, the first plan would cost you £44, and the second would cost you £20, so the second type of plan would be better. On the other hand, if you go ten times a month, the first plan would be £60, and the second would also be £60, so they'd be the same. If you went more than ten times, the first plan is better (e.g., 15 times a month, the first plan costs you £70, the second costs you £85). This is the situation with the standing charges (like the membership) vs the unit price (like the cost per visit). So knowing how many times you plan to visit (or in the case of energy, approx how much you use each month) lets you decide which plan is the best for your situation.

The price cap and fixed vs tracker tariffs tell you about how much they are allowed to charge, and how often they can change etc., so you can choose your tariffs both based on what is cheapest for your usage, but also how comfortable you are with how often in changes. I prefer certainty for my budget, so I'd go for slightly higher costs for more certainty.

You can sign up to "Which" or a similar service which will alert you if they find a cheaper deal, compared to your current deal.

Beware, some energy suppliers charge £30 or more to exit their deal, before their deal comes to its normal end date.
Some suppliers have no exit charge.

Basically the price cap only applies to those on the standard variable rate. If you're in a fix or some other product they can charge you whatever they like.

Fixes are currently being offered at higher than the price cap because the expectation is that the price cap will increase quite a lot in the next year.

They could say if the fix is £x less than the price cap it's worth switching, but as the price cap changes every three months it's easier to say 10% less.

When they say the price cap equates to £1300 a year - that's an illustration and based on average household usage. Obviously if you use more electricity than the average household even with the price cap you'll pay more.

@QueenHilda do you have storage heaters and/or do you have an Economy 7 tariff as that would make a difference too?

There are some useful Facebook groups that give advice on energy bills etc. Home Energy Matters is a good one.

OP, I got a personal breakdown attached to the email they sent me. It shows what they estimate I would save by fixing.

Have you received similar?

Prices also differ per region, how you pay and the sort of meter you have

https://www.ofgem.gov.uk/get-energy-price-cap-standing-charges-and-unit-rates-region

Thanks! I have just gone looking, and yes I have! It says I could save £7!

It’s not much of a saving, I don’t know if I should fix anyway? I guess the downside would be if prices go down between now and December 2025. I guess they might next summer?