There’s so much to get your head round within the vitality trade. Kilowatt hours, unit costs, standing fees, tariffs – what does all of it imply?
Whereas we attempt to make shopping for vitality so simple as shopping for cornflakes, the jargon and complexity of the trade usually get in the best way.
To assist, we’ve put collectively a brief information that explains the fundamentals, from selecting a tariff to understanding your utilization.
Let’s begin firstly.
How does the vitality market work?
The vitality market is made of three components:
Vitality suppliers – like us, or a Large Six provider like British Fuel.
Vitality turbines – wind farms, photo voltaic farms, nuclear, gasoline, and so forth.
Infrastructure managers – pipes, pylons, and cables, balancing provide and demand, platforms for the commerce of vitality and managing its supply into your private home.
We’re an vitality provider. Which means we purchase vitality in your behalf from the turbines and handle all of the tough facets of the trade – like liaising with turbines, infrastructure managers, and the regulator – so that you don’t should get entangled. Many suppliers provide each gasoline and electrical energy, however some solely provide one.
How can we measure the vitality you utilize?
Whether or not it’s electrical energy or gasoline, a meter linked to your private home data your vitality utilization in models.
A unit of electrical energy is measured as a kilowatt hour, written as kWh.
1 kWh means you’ve used the equal energy of 1,000 watts over one hour.
The extra vitality you utilize, the upper the variety of kWh.
How can we cost for the vitality you utilize?
All vitality suppliers cost you in the identical manner:
We cost a unit fee which is the quantity you pay for every kWh you utilize.
We cost a standing cost which is a each day fee for having an vitality provide. This pays for getting the vitality from the turbines all alongside the wires and into your private home, which now we have to pay whether or not you utilize any vitality or not.
Utilizing the kettle instance above, the value calculation can be:
The unit fee and standing cost you pay rely upon two issues:
The place you reside – unit charges and standing fees differ geographically to replicate how easy or advanced it’s to produce your space.
The tariff you’ve chosen (you possibly can check out all our obtainable tariffs on our tariff web page)
Grasp on, what’s a tariff?
A tariff units the unit charges and standing fees on your vitality provide, and so they usually are available in two varieties:
1. Variable
A variable tariff means your unit charges and standing fees change when the wholesale value of vitality modifications. In case you’d like your vitality costs to maneuver with the wholesale market, which implies it might go up and nicely as down, that is the kind of tariff for you.
Most variable tariffs change a handful of instances a yr – with some suppliers fast to lift costs when wholesale prices enhance, however gradual to scale back them once they fall.
In Could, we launched Octopus Tracker, the UK’s first variable tariff to alter with the wholesale worth each day, so you possibly can get pleasure from reductions as they occur (or will increase – wholesale costs go up in addition to down).
2. Fastened
A set tariff means your unit charges and standing fees are mounted for a sure interval, usually 12 or 18 months (however will be longer). Throughout your mounted time period interval, your provider can’t change your unit charges or standing fees.
When you’ve chosen the kind of tariff you need, the following step is deciding if it presents you good worth. You are able to do this by evaluating your unit charges and standing fees with how a lot vitality you usually use.
How will my utilization have an effect on what I pay?
Usually, vitality suppliers and worth comparability web sites estimate the price of supplying you vitality over a 12 month interval – no matter whether or not you’ve chosen a set or variable tariff. This offers you an estimated month-to-month value in addition to an annual complete for the vitality you’re anticipated to make use of.
To do that, we ask you to estimate how a lot vitality you’ll use for the yr, which you are able to do within the following methods:
1. Utilizing an previous invoice
Ideally, you wish to give your vitality provider an previous invoice, as it will present your Estimated Annual Consumption (EAC). This determine is a complicated estimate primarily based on the meter readings you gave your present provider, and would be the most correct estimate.
2. Utilizing Ofgem’s low, medium, excessive utilization values
Ofgem, the vitality regulator, compiles an inventory of the low, medium, and excessive annual vitality consumption values. These are primarily based on UK median knowledge taken over a two yr interval.
While you don’t have a invoice, these are the following neatest thing (however will not be as correct). Some vitality suppliers and worth comparability web sites estimate your utilization by asking you about the kind of house you’ve gotten, the variety of occupants, and so forth.
3. An estimate that you simply give us
When you’ve got a good suggestion of how a lot vitality you utilize in a yr, we will use values that you simply give us. That is good for individuals who preserve an in depth eye on their vitality utilization.
As soon as now we have an estimate on your annual utilization, we will estimate how a lot you’ll pay for vitality.
How a lot will I pay?
How a lot you pay relies on:
1. How a lot vitality you utilize
2. The unit charges and standing fees on your tariff
For our Tremendous Inexperienced tariff within the London space, we cost 12.87p per unit electrical energy, with a each day standing cost of 21p.
In case your utilization is roughly just like Ofgem’s medium values (for houses which have round 3 bedrooms, 3-5 occupants, and maybe a number of house through the day) then your estimated electrical energy consumption for the yr can be 3,100 kWh.
Subsequently, your quote for the yr can be:
(3,100 x 12.87) + (365 x 21) = 39,897 + 7,665 = £475.62
IMPORTANT: Estimates are simply that – estimates. In case your precise utilization is kind of than estimated, the quantity you pay for the yr is perhaps larger or decrease. No matter occurs, we recurrently monitor your utilization and can let if we predict it’s too totally different to what we anticipated.
How do I pay?
We don’t anticipate you to pay on your annual vitality utilization upfront. As a substitute, we ask that every one our clients pay by month-to-month Direct Debit.
We calculate your month-to-month fee by dividing your annual quote by 12. Utilizing the instance above, your month-to-month funds can be round £40. Your vitality funds are added to your account, and each month, we deduct the price of what you’ve used from this pot.
Your utilization will differ with the seasons (you’ll use extra in winter than in summer time), however our intention is have your vitality account at zero by the tip of the 12 months, which means you don’t owe us cash, and we don’t owe you cash. In impact, you’ve paid for precisely what you’ve used.
This doesn’t at all times work out, although.
In case you’ve underestimated your utilization for the yr, then you could possibly find yourself with a debit steadiness. In case you’ve overestimated, you could possibly be in credit score. Common meter readings assist keep away from increase credit or debits – we’ll keep watch over your account to verify it’s heading in the right direction.
Will the quantity I pay ever change?
Probably.
1. In case you’re utilizing greater than you thought you’ll
To keep away from increase an enormous debit by the tip of the yr, we would ask you to extend your month-to-month funds to make up the distinction between what we estimated and your precise utilization.
2. In case you’re utilizing lower than you thought you’ll
We suggest you retain credit constructed up over the summer time to offset your larger utilization in winter – often 1-2 months credit score will see you thru the colder months. However if you happen to’re fearful about your credit score steadiness, we can provide you a refund or decrease your month-to-month funds to even issues out a bit.
3. In case you’re on a variable tariff
Being on a variable tariff means your unit charges and standing fees will transfer with the wholesale value of vitality (the price to us of shopping for vitality in your behalf). This implies your tariff might change halfway by means of the yr – both up or down – which could have an effect on your month-to-month funds. We at all times give 30 days discover of any worth rise, and 5 days of any worth discount.
4. In case your mounted tariff ends
While you select a set tariff, your unit fee and standing cost are mounted throughout the tariff. If the wholesale worth modifications all year long, you may discover that you would be able to repair once more at a decrease or larger worth when your mounted time period involves an finish, relying on which manner the market moved.
What occurs on the finish of a set tariff?
On the finish of your mounted tariff, we’ll offer you cheap discover of your choices.
1. You are able to do nothing.
You may mechanically transfer to Versatile Octopus, our variable tariff, when your mounted time period ends. We’ll present you an estimated annual value for this tariff primarily based on how a lot vitality you used over the mounted time period.
2. You possibly can repair your unit charges and standing fees once more.
If the wholesale worth modified throughout your mounted interval, you may discover your unit charges and standing fees are a bit larger or decrease than earlier than. Both manner, we’ll estimate your annual value primarily based on what you used over the earlier mounted time period.
3. You possibly can go inexperienced.
You possibly can select our Tremendous Inexperienced tariff and get 100% renewable vitality, with carbon offsets for gasoline. It is the most effective worth renewable tariffs available on the market, and is ideal if you would like to do your bit for the planet.
4. You possibly can store round.
In case you fancy a go searching, we have constructed our personal comparability web site to allow you to see the costs of all publicly revealed vitality tariffs out there. Simply go to Each Vitality to check costs.
