Energy bills explained: understanding your gas and electricity bill
By Matt Mostyn Friday 05 March 2021
We get it. Energy bills can be tricky to figure out. At first glance, they can seem like a headache-inducing jumble of facts and figures. In fact, YouGov research on behalf of Uswitch found that 60% of people find their energy bills confusing. From spotting unit pricing to seeing what you owe, it’s clear that at first glance, energy bills aren’t always – well, clear.
We do our best to make your gas and electricity bills as easy to understand as possible. It’s part of our mission to make energy simpler, fairer, and more transparent. But to comply with the law, we have to include lots of other info. This means your bill runs to several pages, making it hard to find the particular facts and figures you want.
So to help, this guide will show you how to read your energy bills. Ready to make decoding your energy bill a thing of the past? Let’s go...
Energy bill breakdown: the basics
Here’s a breakdown of some of the key points your gas and/or electricity bill will cover:
Most tariffs or energy plans have a name. It’s handy to know which plan you’re on, in case you ever want to remind yourself of its features. Or compare it with another (whether from OVO or any other supplier). You can check out all the details of each plan on our Home energy tariffs homepage.
Estimated energy use in the last 12 months:
This shows your estimated use for the past year – but it may not be the actual amount, unless we have regular meter readings. Remember to submit regular meter readings, to make sure you're being charged for the exact amount of energy you're using. Of course, if you have a smart meter, you won’t usually need to do this.
Total kWh used/this cost:
This shows your monthly electricity use. Bear in mind that it’ll be less accurate if you've not given regular meter readings (unless you have a smart meter).
Total units (100s of cubic feet)/this cost:
This shows your monthly gas use (if you use gas). Again, it’ll be less accurate if you've not given regular meter readings.
Electricity supply number:
Your supply number is also called a Meter Point Administration Number or MPAN. It’s a useful number to know if you're looking at switching suppliers. It’s unique to your home, and is usually 21 digits long.
Cheaper Tariff messaging:
This tells you if you could be on another cheaper tariff with your supplier. It shows you the one that’s most similar – and the cheapest overall.
A standing charge is a daily fixed charge that goes towards the cost of supplying energy to your address. It includes the cost of the pipes and power lines, and maintenance of your meters. You pay your standing charge no matter how much energy you use – even if you have a smart meter.
A unit rate is what’s charged for each unit of energy (kWh). Each plan has different unit rates. To find out yours:
Check the welcome letter you were sent just after sign-up.
Or (for OVO members):
Log into My OVO
Click ‘Check my details’ under ‘My Profile’
Under ‘My plan’, look for the number that comes before ‘p/kWh’
You can also check out our unit rate table. This also includes our standing charges. But if you fixed your prices a while ago, these rates may not be the same as the ones you’re paying. That’s why it’s better to check your welcome letter, or your online account.
What’s included on your bill?
Now we’ve covered some of the general points, here’s a quick guide to some of the specific info you’ll spot on your bill:
The name of the current tariff
This tells you the tariff you're on. For instance, our tariffs have names like “Better Energy” and “2-Year Fixed”.
The cost of energy in the last 12 months
Your bill will show the cost of your energy during the last 12 months. And if you haven't been with your supplier for this long, it’ll cover the length of your membership to now.
An estimate of the next 12 months' cost
This projects the cost of your energy for the next year, based on the energy you've used till now.
For estimated readings, our system works out how much energy you used each day between the first estimated reading and any readings you’ve submitted yourself.
Then it calculates what reading you’d have reached on the day your statement is issued, if you’d continued using gas or electricity at exactly the same rate each day.
So, for instance:
We issue a gas statement for the period ending 1 October at a reading of 8,000.
On 25 October you give us a reading of 8,025 – so you’ve used 1 unit a day over those 25 days.
Your next statement covers the period up to 31 October – so for those extra 6 days, we add on another 6 units.
If you’ve got a smart meter, and you chose for it to send us meter readings “once a month” or “once a day”, we’ll only base your statement on estimated readings if we’ve lost communication with your smart meter. If you think your smart meter might have lost connection, check out our smart meter troubleshooting guide, to find out how to get everything working again.
And if you don't yet have a smart meter, find out why it’s good for both you and the planet – and how to get one for free, in our useful guide to smart meters.
Conditions of contract, including exit fees and end dates
This outlines the terms of your contract, including any exit fees, and the date your current tariff ends.
Information about discounts
Here you’ll find details of any discounts or offers that could be available on your plan – for instance, if you pay by Direct Debit.
What’s not included on your energy bill?
Next, here’s an explanation of some of the info your bill doesn’t usually include:
What a “kWh” means
A kWh, otherwise known as a kilowatt hour, is a measure of how much energy you’re using. It’s not about the number of kilowatts you’re using per hour. Instead, it’s a unit of measurement that equals the amount of energy you’d use if, say, you kept a 1,000 watt appliance running for an hour. So if you switched on a 100 watt light bulb, it would take 10 hours to rack up 1 kWh of energy. And a 2,000 watt appliance would use 1 kWh in just half an hour.
Confusing terms, such as “debit” and “credit”
Rather confusingly, the way these terms are used in the energy industry is different to how you might use them elsewhere. Here, “credit” means when you've paid extra on your energy bill. And "debit" means deficit – ie. you owe the supplier. At OVO, we talk about whether your energy account has a positive or negative balance. It's simpler that way.
What’s an Independent Gas Transporter?
Sometimes, Independent Gas Transporters are used to fit pipes instead of the National Grid, (as they’re cheaper). If the Meter Point Reference Number (MPRN), (which is used to identify the specific gas supply for your home) on your bill is 10 digits long and starts with 74 or 75, this means you're supplied by an independent gas transporter.
Could you pay less? Crucial tips to help you save £100s on energy bills
Here are some handy tips to help you save money on your bills:
Switch to a different tariff
You could pay less by switching to a different tariff in the OVO family – and your bill should tell you if this is the case. This will certainly have an impact if you’ve come to the end of your current plan, because you’ll likely have been automatically rolled onto a default tariff. This standard variable rate will probably be more expensive than the fixed-rate you were on.
Pay by monthly Direct Debit
With Direct Debit, you make a monthly payment, straight from your bank account, based on an estimate of how much energy we believe you’re likely to use in the coming months. If you send us monthly meter readings, we can get a much better picture, so your energy bills are spot on.
You’ll get a bill every month, either a few days before or after your Direct Debit comes out.
Finally, be aware that because your nominated Direct Debit amount is based on an estimate, we may review it from time to time, and ask you to change the amount, based on your use over time. That’s done so that you can end each year with a £0 balance.
If you don’t have a Direct Debit set up, you’ll pay for your energy after you get your bill. This is called paying On Demand. But it costs you slightly more, simply because it’s cheaper for us to manage your account when you pay by Direct Debit.
Get a free smart meter and IHD
A smart meter is a digital gas or electricity meter that communicates with your energy supplier, so you can send your readings automatically. Smart meters come with an In-Home Display (IHD), which helps you track your energy use in real-time, and see where you could be wasting energy (and money). This can change the way you use energy – cutting your costs and your bills!
Learn some heating-saving tips
You can make big savings on your bills if you reduce the amount of heating you’re using, especially through winter. So learn some helpful tips to help you use your heating more efficiently, check out our insulation guides, and get inspired by our blog featuring 120 ways to help you conserve energy at home.
How do energy bills work?
Here, we’ll run through some of the key facts relating to how energy bills work, and the costs and other factors that affect them.
Why do gas and electricity bills change?
Energy prices aren’t set by Ofgem (the “industry watchdog” for the energy markets) or by the government. Instead suppliers compete against each other for customers. This competition creates changes in the market as prices change, so that companies can remain competitive.
Changes in wholesale energy costs can cause suppliers to raise or cut prices accordingly. Wholesale costs are how much your supplier has to pay to get the gas and electricity to sell on to you. When availability is high and demand is low, prices are generally lower. But when demand rises and there’s less availability, wholesale prices rise.
To find out more about wholesale energy costs, and how these changes over time, read our practical guide.
Network and balancing costs
Suppliers are charged for the costs of maintaining and using the network of wires and pipes that carry energy to your home. These charges are passed on to customers through your bills. But because network charges may vary from year to year, this is another factor that affects the size of your gas and electricity bills.
Costs of government obligations
Other costs come from government programmes to save energy, reduce carbon emissions, and encourage everyone to use green energy. These programmes can also indirectly affect your bills.
VAT is the value-added tax paid on household energy bills – and of course, this can also go up or down quite regularly.
Most popular customer questions
Do I have to pay an estimated electric bill
If you haven’t given a meter reading recently, your supplier might use your average energy usage to calculate your bill. But you don’t always need to pay an estimated bill. Instead, contact your supplier to give an up-to-date meter reading, and ask them to send you a new bill.
How do I make sure I’m billed correctly?
Your bills can be based on predictions of how much you’ll use, rather than meter readings. In this case, you can take meter readings yourself, to see if they’re different to the estimates. And if you make sure your bills are accurate, rather than estimated, find out how a smart meter could give you greater control over your gas and electricity.
What does debit mean on a bill?
DR (or debit) means you owe money to your supplier, as you haven’t paid enough. If a debit balance keeps growing, your supplier may suggest raising your Direct Debit payment, to help you catch up.
At OVO we don’t use the word “debit”. Instead we call this a negative balance.
We know Direct Debits can sometimes be confusing. That's why we've put together an easy-to-follow guide, to help you understand exactly how Direct Debits work.
What does credit mean on a bill?
CR (or credit) means you’ve paid for more energy than you’ve actually used. Not a bad predicament to be in! It happens if you use less energy than you’ve paid for – but remember, you may use more than usual over the winter months. So any credit in your account could be handy to help cover those extra heating costs.
At OVO we don’t use the word “credit”. Instead we call this a positive balance.
If you’re already an OVO member, you can also get 3-5% interest rewards if you’re in credit. And if you’re not yet with OVO yet, switch today, and start reaping those rewards yourself!
What to do if I’m struggling to pay my energy bill
If you have a high energy bill and you don’t think you’ll be able to pay it, you can arrange to set up a payment plan with your supplier. Find out more about what to do if you’re struggling to pay your bill.
One other option is to have a prepayment meter installed. You can pay off any negative balance gradually, while paying for your current energy use too.
Not yet with OVO? Want to cut your energy bills and your carbon footprint? Get a quote in just 2 minutes
If you’re looking for other ways to save energy and reduce your gas and electricity bills, switch to OVO today. You could save money, while lowering your carbon footprint. Plus, enjoy:
Competitively-priced 100% renewable electricity as standard1
A 5-Star TrustPilot rating by 30,000 members
A tree planted for every year you’re with us2
3-5% interest for every year your account has a positive balance3
A £50 gift card every time you introduce a friend to OVO
Sources and references:
1. The renewable electricity we sell is backed by renewable certificates (Renewable Energy Guarantee of Origin certificates (REGOs)). See here for details on REGO certificates and how these work.
2. Each year, OVO plants 1 tree for every member in partnership with the Woodland Trust. Trees absorb carbon dioxide from the atmosphere, so tree-planting helps to slow down climate change.
3. Interest Rewards are paid on positive balances of customers paying by monthly Direct Debit. It is calculated at 3% in your first year, 4% in your second year and 5% in your third year (and every year thereafter) if you pay by Direct Debit.