Compare Electricity Prices: The savvy guide to save £££
Despite many energy suppliers going bust in 2021, there are still plenty of electricity suppliers in the UK offering numerous variable and fixed-rate tariffs. With all these home energy options, it can be a bit overwhelming to try to compare electricity prices by yourself. Keep reading to learn what to look out for when you compare electricity prices.
How to compare energy prices
To help you sort the best from the rest, we will explain how to understand your energy bill, the jargon of unit rates, standing charges, billing options and exit fees, and when is the best time to compare electricity prices to make it easier to know how to get the best deal on your electricity and start saving today.
Will energy prices rise in 2022?
There's every reason to believe that the prices will go up in 2022. Due to the increased cost of wholesale energy, the energy price will rise even further. Whilst you may be skeptical to compare electricity prices during an energy crisis, you could save money in the long-term with a fixed-rate deal as you can lock-in your energy prices before they go up.
Understand your electricity bill
Switching your energy tariff is a surefire way to save you money and a quick and simple process if you know what to look for. It’s important to understand terms such as 'unit rate' and 'standing charge' to ensure you’re getting the best deal possible. Let’s take a look at what these mean before comparing some of the electricity tariffs on the market today.
1. Unit Rate: the price of electricity
When you compare electricity prices, it can be easy to be swayed by a supplier offering you a deal for £40 a month. However, you need to make sure the usage quoted is the same as what you use, or at very least the same as you've been quoted by other suppliers. We'll touch on that more further down, but the easist way to find a cheaper deal when you compare electricity prices is to look at the unit rate on offer.
The unit rate refers to how much each kilowatt-hour (kWh) of energy will cost you. This is what makes up the biggest part of your electricity costs. The unit rate remains the same for the duration of a fixed-price contract, though it will fluctuate according to wholesale electricity prices on a variable tariff.
What’s a kilowatt-hour?Electricity units are measured in kilowatt-hours, usually abbreviated to kWh - that’s one kilowatt of electricity being used over an hour. You can often find how much energy an electrical household appliance uses in watts on its packaging.
For example, a 60 watt lightbulb would need to be on for almost 17 hours to use one kilowatt-hour.
2. Standing Charge: a residential delivery fee
The next thing you need to look at when you compare electricity prices is the standing charge, this fixed daily charge is applied to your bill regardless of if use any energy or not and covers costs such as:
- Keeping your house connected to your Distribution Network Operator
- Carrying out meter readings
- Infrastructure maintenance
- Contributions to government initiatives and energy schemes
This cost is usually displayed on your quote as 'per day' in pence and remains the same for the duration of your contract.
£0 Standing Charge?
Some tariffs, such as those offered by Utilita, claim to offer no standing charge, but it would be wise to be wary of these. Generally, if an energy supplier offers no standing charge, its energy unit rate is much higher in cost than the average.
However, if you have a property that is uninhabited for much of the year, this may be something to consider, as you will only be charged based on how much energy you are actually using.
3. Exit Fees
Contract lengths generally only apply to fixed-term tariffs. Technically, you do not have to fulfil your contract until the agreed termination date, however, failing to do so can incur an exit fee.
In most cases, if you wish to change providers or tariffs before the end of your term, you will have to pay a predetermined exit fee, usually in the range of £5 to £100 per fuel, though this varies between suppliers.
When you compare electricity prices, you should check if your current tariff has exit fees. If it does, you can still go ahead and shop around as you might find a better deal that is cheaper, even after you factor in your exit fee.
There are some fixed-rate tariffs available in the electricity market that do offer the possibility to leave without having to pay an exit fee.
By law, exit fees are waived once you are in the final 49 days (seven weeks) of your fixed-rate contract. As you have a 14-day cooling off period before a switch is made, you can start to compare electricity prices around nine weeks before the end of your contract.
All electricity costs, discounts and incentives are subject to a standard VAT rate of 5%. The Labour party had called for the VAT on energy to be scrapped, however the government has suggested that current energy schemes are better suited to helping vulnerable customers rather than cutting VAT.
For business energy customers, the rate of VAT is currently 20%. Eligible businesses can apply for a discounted rate of 5% if they meet the following requirements:
- You are a charitable or non-profit organisation
- At least 60% of your energy is used for 'domestic purposes'
- You use less than 1,000kWh of electricity each month
Businesses that meet at least one of those requirements can submit a VAT declaration form via their business energy supplier. The business can also request refunds for any overpayments dated within the last four years.
Paying your electricity bill
There are generally three options when choosing your payment method:
- Direct debit
- Cash or cheque
- Pay as You Go
Each of these has its own benefits. However, we recommend that for the majority of customers direct debit is the way to go. Not only is it more convenient, but most suppliers will even offer a discount for those who pay using this method.
Many people often as 'is pay as you go electricity cheaper?', the answer is no. With pay-as-you-go, also known as prepayment, the cost is generally much higher and very few suppliers offer fixed-rate deals for these customers. This means you will be on a standard variable tariff if you have a prepayment meter in your home and your energy price can increase at any time.
We recommend customers with pay-as-you-go energy to consider switching from a prepayment meter to direct debit to allow you to better compare electricity prices and get a better deal.
How to compare electricity prices yourself
Now we know what charges our bill is made up of, we can begin to compare electricity prices.
To get a better idea of annual costs, it's good to know your average electricity usage. We also recommend using our handy energy consumption tool to get an accurate estimate of how much electricity you use.
Below we have included the most recent average electricity consumption figures released by Ofgem.
|Fuel||Level of consumption||Consumption|
|Electricity||Low (1-2 bedrooms/flat)||1,800 kWh|
|Medium (3-4 bedrooms)||2,900 kWh|
|High (5+ bedrooms)||4,300 kWh|
To get our final annual electricity price, we need to include:
- Unit rate
- Standing charge
- VAT (5%)
Below, we’ve calculated a fixed price electricity tariff for a 3-4 bedroom home with a unit rate of 20.773p per kWh and a standing charge of 23.307p per day. We’ve also included the standard 5% rate of VAT that applies to energy costs.
|Unit rate||£0.20773 x 2,900 = £602.42|
|Standing charge||£0.23307 x 365 = £85.07|
|Total electricity used in this period||£687.49|
|VAT of 5%||£34.37|
|Annual electricity price||£721.86*|
*Final costs are rounded.
Adding up to a whopping £721.86, we’re clearly paying far too much on this plan. This time, let’s try a different tariff with the following conditions:
- Unit rate: 19.780p per kWh
- Standing charge: 22.190p per day
|Unit rate||£0.19780 x 2,900 = £573.62|
|Standing charge||£0.22190 x 365 = £80.99|
|Total electricity used in this period||£654.61|
|VAT of 5%||£32.73|
|Annual electricity price||£687.34*|
*Final costs are rounded.
As you can see, when you compare electricity prices we could save £35 a year. In other cases you may even be able to save much more, depending on the type of tariff you’re currently on and what tariffs are available.
Switch electricity tariffs the easy way
Once you’ve been able to compare electricity tariffs and select the one that suits you the best, it’s time to switch your provider.
Armed with just a few details about yourself, your home and a rough idea of your energy consumption, you can contact your chosen provider’s customer service or make the switch through a third-party service, such as Selectra.
- What details do I need when calling to compare electricity prices?
- The name of your current supplier and tariff
- Your average monthly or annual energy consumption in kWh or pounds
- Your contract end date You can find all of this information on your latest bill or through your current energy supplier’s online portal.
What do I need to do next?
If you like the sound of a tariff on offer, you’ll be set up with a switching date. Your new supplier will take care of just about everything to do with the changeover from your current electricity provider.
You won’t need to install any new equipment, unless you’re moving from a prepayment meter to a direct debit tariff or vice-versa, or if you’re having a smart meter installed. This is usually covered by your new energy supplier and won’t cost you a penny. All that’s left to do is put your feet up and watch the savings roll in!
How long will it take to switch over?
Your switch should take no more than 21 days, including a 14-day cooling-off period. During these 14 days, you’re free to cancel the switch and stay with your current supplier if you change your mind for any reason.
What types of electricity tariffs are on offer?
The two principal tariff types offered by energy providers are fixed-rate and variable.
Variable tariffs will adjust according to the wholesale price of electricity. This means your bill could get cheaper, though it's more likely to increase over time.
If you’re on a fixed tariff the price of electricity per kWh will not change for your contracted duration, leaving you safe in the knowledge that your bills are not going to soar at any given moment, unless you start to consume more energy than normal.
Dual fuel: electricity and gas together
A dual fuel tariff is a plan where both your gas and electricity are supplied by the same energy provider. This means just one bill to pay for both types of fuel, with many suppliers offering discounts for signing up for both fuels it's a good idea to compare electricity and gas prices with the same supplier.
Customers on prepayment electricity tariffs pay for their energy ahead of time, much like a pay-as-you-go mobile phone. Prepayment tariffs use a special kind of meter that is topped up by key, card, token or online for those with a smart prepayment meter.
Prepayment electricity tariffs are generally among the most expensive, though they could be a good option for those who like to set a weekly budget and pay for their energy bills in advance. However, the lack of fixed-rate tariffs makes them less competitive when it comes to compare electricity prices for pay-as-you-go customers.
With climate change increasingly playing a part in our choices as consumers, green energy tariffs offer the eco-conscious customer peace of mind that they’re doing their bit for the environment by using energy from renewable sources, such as wind, solar power and hydropower.
Energy suppliers that offer green tariffs have previously been more expensive than those that rely on dirty fossil fuels, though this is rapidly changing, with many providers offering renewable electricity plans at the same price - or even cheaper in some cases.
Economy 7 and Economy 10: off-peak electricity
Economy 7 and Economy 10 are electricity tariffs that have a cheaper off-peak rate at night and a more expensive rate during the daytime. This may suit those who use storage heaters which charge overnight.
Both Economy 7 and Economy 10 require the installation of a differential rate meter which offers two electricity prices. Although Economy 7 and Economy 10 meters are rapidly becoming a relic of the past, you can still find tariffs with a limited number of suppliers, on both prepayment and direct debit options.