Do you really understand your utility bills? If the answer is yes, then you could be in the minority.
Energy regulator Ofgem is worried that many consumers are failing to get the best deal because they are befuddled by the jargon used by gas and electricity companies.
As a result millions of households are paying more than they need for gas and electricity because they have never changed supplier. You could cut your annual energy bill by an average of £282 by moving to a better deal.
Switching energy provider is simple and straightforward to do. Our comparison tool enables you to identify the cheapest deal for you and highlights the savings you stand to make. You can then click through the site to apply directly and your new energy provider will do the rest. All you will need to do is provide your bank details so a direct debit can be set up and a meter reading when the transfer takes place.
Why is energy literacy an issue?
A committee of MPs is testing the "energy literacy" of gas and electricity bill payers as part of an inquiry to see if more education is needed to improve competition and make it easier for people to switch tariffs.
The energy literacy investigation will study whether people know how much the cost of energy changes according to usage and how this is displayed on a bill.
The number of different energy tariffs on the market has ballooned to more than 400 in recent years.
What’s more, the structure of the charges, and the eventual price you pay, can vary depending on factors such as how you pay, whether you are on an internet-only tariff and which part of the country you live in.
There are also signs that energy company sales forces often convince confused consumers to switch to new deals that will in fact cost them hundreds of pounds more a year.
An undercover investigation by consumer champion Which? found that, despite quoting annual savings of between £20 and £142, the deals offered by salespeople based in supermarkets and shopping centres would actually have left customers between £39 and £311 worse off.
The pressure group also claims to have evidence that those calling energy firms for advice do not always get accurate information and quotes.
No wonder Ofgem has slammed the domestic energy market for being based on "complex tariffs, poor supplier behaviour and a lack of transparency".
What’s going to change?
Ofgem wants to stop the confusion by making suppliers offer one standard tariff for each of the various payment methods - cheque, direct debit and pre-payment meter - and each energy type.
If it gets its way, there will therefore be just six standard tariffs per supplier – three for gas, three for electricity – although companies would still be able to offer as many sophisticated deals, such as dual-fuel tariffs, as they wanted.
Bill formats are also set to change, with Ofgem calling for them to display charges in the form of pounds or pence per month, as well as per kilowatt hour.
This should help to prevent people being confused by the jargon used at the moment (see below).
The regulator hopes the new regime will be in place by the last quarter of this year, although it admits it will need industry support to meet this deadline.
Energy bill jargon buster
kWh: This stands for kilowatt hours, which is currently the standard energy bill measurement used to show how much gas or electricity you have used during a certain time.
Calorific value: This is the quality of the gas you receive. In other words, it demonstrates the amount of energy created by burning the gas.
Primary/secondary units: Energy companies charge more for so-called primary units of gas and electricity. Cheaper secondary units come into play when the primary units are used up.
mpan: This stands for your unique, 21-digit electricity “meter point administration number”.
mprn: This abbreviation refers to your unique gas meter number, which remains the same irrespective of your supplier.
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