Page 2 | Please can somebody explain energy tariffs to me like I am an idiot (because I am).

Original poster

QueenHilda · 14/09/2024 11:49

BlossomToLeaves · 14/09/2024 11:33

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.

Thank you for explaining this 🙏

OP posts:

Original poster

QueenHilda · 14/09/2024 11:50

Anisty · 14/09/2024 11:32

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!

Thank you! I have seen that I’m estimated to be just £7 better off if I fix. But if I can hop back to the flexible rate at any time, I guess it still makes sense to do the fix?

OP posts:

dementedpixie · 14/09/2024 11:50

When did you get the email with the price changes as I don't think I've had it?

FluffAtTheBackOfTheDrawer · 14/09/2024 11:52

QueenHilda · 14/09/2024 11:48

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?

Show quote history

I am leaning towards just leaving things because it's still cheaper than last year. On the other hand, if they will also email to tell me if/when it would be cheaper to switch tariffs again, then maybe I will fix for a bit.

The estimated saving is greater for my gas bill, so I have to consider them both together. I'm going to sleep on it.

StrawberrySquash · 14/09/2024 11:52

Barrenfieldoffucks · 14/09/2024 11:17

My little table.

SC a little more than cap but units ok

YANBU, OP. It's a PITA and I swear they make it harder to read just so people don't bother to switch. For example Octopus are currently quoting me a flexible and a fixed tariff. Is there a place I can see all three on the same screen side by side? No. And in the current prices they quote the unit prices and then the fixed prices. In the new tariffs they quote the electricity prices and then the gas.

You can't screenshot and see all the prices and the tariff name on one page.

All of this it's perfectly easy to make a table out of like the one above, but why are they making me do the extra work? I want a single table that shows everything side by side on the website.

FluffAtTheBackOfTheDrawer · 14/09/2024 11:52

dementedpixie · 14/09/2024 11:50

When did you get the email with the price changes as I don't think I've had it?

Mine came on Thursday.

StartingANewNameToday · 14/09/2024 11:57

If you're with Octopus then I would seriously look at their Tracker tariff.

(Some) people shun it because of the 'risk'. I've been on it about 17 months and it's been consistently, significantly lower than standard tariff rates, every single month. No exceptions.

Today, I'm paying 19.8p/Kwh for Electric. One day last week it was 14p odd. It's saved me a damn fortune.

easylikeasundaymorn · 14/09/2024 12:09

Ignore anything that says anything like "the price cap is £1717 a year" (i.e. any amount that is is in whole pounds rather than kw/h or daily standing charge). This is because this refers to a standard household on a standard tariff, so it's completely irrelevant for anyone else. It's just an amount used as an illustration to make it easier for people to understand, because "my gas&electric bill is £1717 a year" is easier than "I pay 25.2p per kwh and 61.2p standing charge for electric and 5.5p per kwh and 30.1p standing charge per day for gas."

It's stupid because it just confuses people instead and they think that even if they whack the heating on full everyday and keep all the lights on they will never be able to be charged more than £1717, which is not the case.

You only need to know the current cap per unit and standing charge is, and compare this to what your current charge per unit and standing charge is (or what you're being offered), which it seems you know. If the two are quite close then it's worth fixing. If what they are offering you is quite a bit more than the cap, then it's probably not. Octopus seems to be offering you nearly 4p more per day standing charge and 7p more per unit which doesn't sound great BUT bear in mind it's a fix for 15 months and the cap goes up every quarter (so 5 times within those 15 months). So for the first 6-9 months you will probably be paying more than the cap, by the last 12-15 you might be paying less.

Honestly, living alone in a small house I wouldn't bother worrying about it too much. Whether you went with the octopus deal or stayed on the cap, 4p difference a day standing charge is £1.20 a month. That is the absolute max you would either save or lose. As the price cap increases each quarter to being the same as the fix, that difference will lessen.

Unless you're using loads of electricity the same will apply to the unit rate - for big families having a shower or two each a day, cooking constantly in the oven, running a fridge freezer and a spare freezer, doing a load of washing and drying every single day, and having the heating on in every room, as a pp explains for them it would be worth looking at the best energy rate and fixing with something that has a higher daily charge and lower unit price. But for 1 person it really won't make that much of a difference - unless you're on the bones of your arse and every penny counts, the time you'll waste in working out the best deal is probably less than the five quid a month or whatever you might save.

Either stay on the cap, or look on which or MSE, see what the best deal currently available is, and switch to that. Then don't think about it for another 12 months.

CaptainCabinetsTrappedInCabinets · 14/09/2024 12:14

QueenHilda · 14/09/2024 11:10

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?

Eon next pledge. Guaranteed to always be £50 lower than the price cap (£25 per fuel)

Referral code for us both to get £50 if you switch

share.eonnext.com/young-guppy-9921

Original poster

QueenHilda · 14/09/2024 12:23

Thank you so much everyone for taking the time to help me. I think I will fix, seeing as there are no exit fees and I can always leave again if prices drop.

Really appreciate everyone’s help in understanding this.

@dementedpixie my email arrived about 3 days ago. I had missed it actually but thanks to another poster on here I went back and found it.

OP posts:

Angrymum22 · 14/09/2024 12:34

It is almost certain that prices are going to up from the 1st Oct, in fact I’m with Eon and they are already quoting their new tariffs.
In my case I’m on variable so have fixed for 12mnths. The fixed tariff is cheaper than the new tariff from 1st Oct so I will save money.
It is a gamble but the new tariff is pretty much guaranteed until March 2025, so I will save money when our usage is highest.
We use approx £200 per month of fuel Oct-Mar then it drops significantly to £100 during the summer months.
So we use 2/3rds of our fuel Oct to March when it will cost us less than the variable rate. If prices come down after March it will not have as much of an impact and the rate may well be the same as the fixed rate so we neither save no lose. So saving more during the colder months will probably be a net gain/saving over the whole year.

Anisty · 14/09/2024 13:19

QueenHilda · 14/09/2024 11:50

Thank you! I have seen that I’m estimated to be just £7 better off if I fix. But if I can hop back to the flexible rate at any time, I guess it still makes sense to do the fix?

Show quote history

Yes, you won't save a fortune - i think we will be £100 over the year but you have peace of mind that you know when they announce price hikes, you can stay relaxed!

Beezknees · 14/09/2024 13:29

I work in energy and I'd advise to fix. Very likely that prices are going up even further in January. There's a chance they could drop again beyond that but not likely to as low as this summer's prices.

easylikeasundaymorn · 14/09/2024 16:01

CaptainCabinetsTrappedInCabinets · 14/09/2024 12:14

Eon next pledge. Guaranteed to always be £50 lower than the price cap (£25 per fuel)

Referral code for us both to get £50 if you switch

share.eonnext.com/young-guppy-9921

Show quote history

You do understand it's not actually £50 though, right? That's just using the misleading "average household" claim again. For each individual it's a proportionate amount of £50 less than the average household on the price cap would be charged. If you use less than the average household (as OP would) it would be less of a saving.

If, for whatever reason you only accrued a £50 bill for the whole year, they wouldn't write it off and say you owed nothing!

https://www.eonnext.com/tariffs/next-pledge -

CaptainCabinetsTrappedInCabinets · 14/09/2024 16:09

easylikeasundaymorn · 14/09/2024 16:01

You do understand it's not actually £50 though, right? That's just using the misleading "average household" claim again. For each individual it's a proportionate amount of £50 less than the average household on the price cap would be charged. If you use less than the average household (as OP would) it would be less of a saving.

If, for whatever reason you only accrued a £50 bill for the whole year, they wouldn't write it off and say you owed nothing!

https://www.eonnext.com/tariffs/next-pledge -

Show quote history

OK..... Bit over invested there.

We still get a free £50 each on top with my referral code.

CaptainCabinetsTrappedInCabinets · 14/09/2024 16:11

Angrymum22 · 14/09/2024 12:34

It is almost certain that prices are going to up from the 1st Oct, in fact I’m with Eon and they are already quoting their new tariffs.
In my case I’m on variable so have fixed for 12mnths. The fixed tariff is cheaper than the new tariff from 1st Oct so I will save money.
It is a gamble but the new tariff is pretty much guaranteed until March 2025, so I will save money when our usage is highest.
We use approx £200 per month of fuel Oct-Mar then it drops significantly to £100 during the summer months.
So we use 2/3rds of our fuel Oct to March when it will cost us less than the variable rate. If prices come down after March it will not have as much of an impact and the rate may well be the same as the fixed rate so we neither save no lose. So saving more during the colder months will probably be a net gain/saving over the whole year.

The price cap has been announced. It's definite.

Bjorkdidit · 15/09/2024 05:20

QueenHilda · 14/09/2024 12:23

Thank you so much everyone for taking the time to help me. I think I will fix, seeing as there are no exit fees and I can always leave again if prices drop.

Really appreciate everyone’s help in understanding this.

@dementedpixie my email arrived about 3 days ago. I had missed it actually but thanks to another poster on here I went back and found it.

I wouldn't fix at 30 odd p a unit if the price cap rate is predicted to be 24 p from October, as prices are expected to be stable at that rate well into next year so you'll overpay.

easylikeasundaymorn · 19/09/2024 12:10

You said "guaranteed to always be £50 lower than the price cap (£25 per fuel)"
That's wrong.
Its not guaranteed to be £50 lower for everyone, only for everyone who uses the exact same amount as the "standard household". OP living alone won't use that much so if she took that deal it wouldn't be £50 less for her.

Most people would say "oh sorry I didn't understand/didn't explain that very well" rather than be sarky to someone who was trying to help.

So I can only assume that at best you don't understand your own energy tariff, are rude and can't deal with being corrected, and at worst you do understand how it works but are actively lying to people to get them to use your referral code and make a nice profit for you and are annoyed at being picked up on it.

As a personality trait I'd rather be "over invested" than any of the above....

BurntBroccoli · 06/10/2024 10:32

Have you looked into the government grants via your Local Authority to install solar panels? How do you heat your home?

Also set a reminder to take an actual reading of your electricity meter every month so you can calculate your actual usage. I submit these readings every month and then a direct debit is taken for what I've used. I only have electric too (no gas and oil heating) so my bill is pretty much the same all year round.