How your electricity or gas bill is calculated

Energy tariffs 

When you choose an energy supplier, you will also agree the price you will pay for the energy you use. This is called a ‘tariff’. There are 3 main types of tariffs:

• fixed rate, where the price you pay is set for a period of time
• standard variable tariff (SVT), where the price you pay can go up or down based on things like the cost of buying energy on the open market – people on this type of tariff are protected by the energy price cap
• multi-rate tariff, for example Economy 7, where you pay one rate during a specified off-peak period and another, more expensive rate during peak hours

Costs included in your energy bill 

Your tariff sets how much you will pay for each unit of energy you use, also called the unit rate, and the standing charge. The standing charge is a fee you pay each day, even if you do not use any energy on that day.

These costs are calculated based on: 

• VAT (5%)
• wholesale costs, the cost a supplier pays to buy energy
• network costs to build, fix and repair pipes and wires to move energy
• operating, debt and industry costs, these are the costs a supplier pays to run their business
• how much the supplier makes before interest or tax, known as ‘earnings before interest and tax’ or EBIT
• policy costs, such as government social and environmental schemes
• the type of energy you use, for example gas or electricity
• the type of meter installed, such as smart meter, Radio Teleswitch meter or prepayment meter
• how you pay your bill, for example by Direct Debit

These costs can go up or down for different reasons, for example because of the price of buying energy. This will affect your bill.

Your bill can also vary based on how your home or business is heated, for example if you use heating oil or your property is on a heat network.

Energy suppliers can charge different costs for energy, so you should look around for the best deal that meets your needs. Check with your supplier if you can switch your tariff or move to a different energy supplier.

Building up credit on your bill

You may build up credit on your energy bill. This happens when you pay for more energy than you have used, for example because you pay a set amount by Direct Debit every month.

Typically you will build up credit over the summer months when you use less energy. It can then help reduce your bills in the winter months, when your energy needs will increase.

You can contact your supplier to claim this credit back at any time. Before you do, you should consider if you will struggle to pay your next bills without it.

When you switch to a new supplier, your old supplier will refund any credit in your final bill. You could get compensation if they do not. Read more about what happens when you switch your home energy supplier.

If there is a problem with your bill 

If you there is a problem with your energy bill, you should contact your energy supplier. You can contact the Energy Ombudsman if you are not happy with the way your energy supplier has handled your complaint.