Tariff Comparison Rates
By OVO Energy Thursday 20 November 2014
Research out today by Which? revealed that 95% of energy suppliers were unable to clearly explain what Tariff Comparison Rates (TCR) are. This is extremely disappointing news as we were one of the suppliers that failed this challenge.
So, first off, we’re going to start by explaining what the TCR is.
The Tariff Comparison Rate is there to act as a price comparison guide for all energy customers. It breaks down the cost of an energy tariff by combining everything from the unit rates, standing charges, VAT and discounts into one amount and then dividing it by the average annual consumption figures published by Ofgem – the energy regulator.
The idea is to allow all tariffs to be compared against one another, by giving you a single price per kilowatt hour for the energy you use. It’s similar to an APR on a credit card or a financial loan.
As we mentioned before, the calculations are based on the average amount of energy that households use in the UK and this is where the TCR can start to be confusing.
This is how it’s calculated:
Multiply the unit rate by Ofgem’s average energy consumption figures*
Add a year's standing charge
Take away any discounts that might be applicable
Add the VAT
Finally, divide this figure by Ofgem’s average consumption figures
This gives you the TCR in pence per kWh
Not exactly simple! But that’s why it’s part of our job to help explain it, and why we’ve now retrained all our customer care agents to make sure they can.
It’s important to know how much energy you’re using to make sure you’re on the right tariff for you. As you can see, if you use more or less energy than the UK average then the TCR isn't going to be an accurate comparison for you. This is because you’re dividing the combined cost of your tariff (the bit where we add the unit rates, standing charges, VAT and then take away any discounts) by the wrong amount of energy used.
This is pretty tricky to write down so we’ve put it into a diagram...
Here are some top tips for an easy switch:
- Know how much energy you use – your supplier can tell you this if you give them a call. Or you should be able to find it on your last statement. OVO customers can just log on to MY OVO and there is a detailed view of their personal energy consumption by month
- Get an accurate quote – this means knowing how much energy you use, the details of the tariff you’re currently on and which payment method you prefer to pay by
- Know what’s on offer from each of the different suppliers, some tariffs come with top notch technology like smart meters or intelligent thermostats and others are 100% renewable electricity
- Online only – lots of suppliers offer discounts for going all online or paperless. Make sure you take advantage of these discounts if you can