The Gas Tariff - Explained
Do you need help understanding the tariff information on your new gas quotation? Maybe you have just switched and you don’t have a clue what it all means? Stick with us and you’ll have no problems. Have a read through our quick and easy guide to understanding your gas label information.
How do I pay?
Your payment method will generally be one of the following three options: Direct Debit; Cash or Cheque; or Pay as You Go. Although each has its positive factors, we recommend to the majority of our customers that they choose the direct debit option. It is by far the most convenient way to pay and ensures that you do not get behind on any payments. This is obviously a great element for the energy utility as well, and as such, many will offer discounts on your bill if you decide to opt for direct debit.
Types of Tariff
Both gas and electricity tariffs come in two principal tariff types: fixed and variable. The difference between the two being whether the unit rate per kWh is fixed or variable. This means that if you chose a fixed tariff, you are safe from any price increases yet will not get any of the benefits from a price decrease; however, if you chose a variable tariff your bill can fluctuate from from month to month, meaning both savings and losses.
The unit rate refers to the unit of measurement used in order for energy companies to measure customer energy usage. This unit of measurement is the Kilowatt Hour (kWh). It is used in both gas and electricity measurements. A simple explanation of its concept would be if you maintained a 1000W appliance switched on, it would take one hour for it to use 1 kWh unit. Using an everyday example, the large burner on your hob will generally use around 2.5 kWh of gas in one hour.
The ‘standing charge’ is an unchanging price that is additional to your gas unit rate. This is added onto your bill to cover such static costs as:
- Keeping your house connected to your Gas Distributor
- Carrying out meter readings
- Contributions to government initiatives such as helping out vulnerable homes.
After the Retail Market Review in 2010, Ofgem, the UKs energy regulator, have been trying to prevent energy companies from over-inflating their gas and electricity prices in order to pay for their static costs whilst actually making more profit also. At present, every every energy tariff for both gas and electricity needs to contain a standing charge. This allows customers to see more transparently where their money is going. It also allows customers to see what company is giving them a better deal more clearly. The standing charge is commonly displayed in a ‘per day’ format.
£0 Standing Charge
Although each energy tariff has to contain a standing charge figure, there is nothing stopping companies from putting said figure as 0. At first, this may appear like a great deal; however, what is happening in the majority of cases is that the company is attempting to revert to the non-transparent pricing structure of pre-2010, allowing them to over inflate their prices to increase profit margins. That said, however, if you have a property that is uninhabited for a large portion of the year, this might be something to consider as you are only charged based on the energy you actually use.
Terms & Exit Fees
Contract lengths will only be applicable when searching for fixed tariffs. The term of this contract will be the amount of time that you have agreed to freeze the price of your unit rate. For example you may have chosen a gas tariff with a unit rate of 3.42p per kWh that is frozen until January 2019. Technically, however, you do not have to see out the whole of your contract if you wish to change provider, although you will generally have to pay an exit fee.
All costs, discounts and incentives are subject to a standard VAT rate of 5%.