How does the UK Energy Market work Part 2 – Tariffs and Energy Billing

What is an energy tariff?

In the energy sector, a tariff is the way in which an energy supply company charges a consumer for their use of electricity and gas.

Energy tariffs come in a wide variety of forms and prices can differ greatly from supplier to supplier depending on where the energy is from or how it's managed. Let’s look at some of the different types of tariff.

UK Energy Tariffs Explained

Fixed energy tariffs

Fixed tariffs or Fixed price energy tariffs  provide a set rate per kilowatt-hour for electricity and gas for a fixed duration, normally 12 months but some can last as long as three years.

These tariffs may fix the rate a consumer pays per unit of gas or electricity, but it won’t protect them from rises to their direct debit contribution if their usage is high. A consumer will also not benefit or suffer from any fluctuations in energy prices.

This type of tariff is normally the cheapest available and makes up most of the competitive deals offered by energy suppliers. Data also shows that many consumers who switch supplier do so to attain the best fixed tariff deals.

Variable energy tariffs

Variable tariffs are often used as an energy supplier's default tariffs and are typically the most expensive offered.

Due to them being variable, it means the unit rates of gas and electricity can be increased or lowered at the decree of the supplier. These tariffs are also dependent on wholesale prices and will rise if they do. A supplier cannot just hike prices; however, they must notify their customers before doing so.

Prepayment energy tariffs

These tariffs require a consumer to pay for their energy before they use it and act in a similar way to a pay-as-you-go phone contract.

These meters are typically found in rental properties or in places where the consumer may have budgetary issues. To top up these meters, a consumer uses either a key, token, or card. The option to top up online is available as suppliers continue to digitise their services.



These tariffs are capped by the energy regulator Ofgem so that consumers cannot be overcharged. This energy price cap is reviewed and updated every six months. Despite this, prepayment tariffs are in general more expensive than fixed tariffs.

Economy 7

These tariffs work with Economy 7 meters and provide a different price per kWh based on the time of use.

Electricity is cheaper at night but more expensive than normal during the day.

These tariffs are ideal for night shift workers who sleep during the day and consume most of their energy at night.

Capped energy tariffs

A capped energy tariff promises that the price of energy won’t increase but will go down based on a supplier’s variable tariff.

These tariffs are often the cheapest available and many energy suppliers offer them to entice new consumers. 

Tracker energy tariffs

Tracker tariffs are rarely offered by energy suppliers and follow a price index such as wholesale costs. They can vary greatly often seeing up and down movements on an often-daily basis. 

Green energy tariffs

Green tariffs are growing in popularity with both energy suppliers and consumer alike. These tariffs often promise customers that the electricity they are receiving comes from 100% renewable sources. Some are also including renewable sourced gas too.

With the drive towards a NetZero economy picking up pace, green tariffs are now an excellent way for energy suppliers to attract new customers and they are often the cheapest on the market.

Unlimited energy tariffs

The unlimited energy tariff provides unlimited energy use for the whole year at a pre-set cost. Although there are are few suppliers using it, many others are considering the option of introducing unlimited energy tariffs or creating similar offerings to meet consumer demand.

Energy suppliers will want to know an estimate of how much energy is being used in a household based on previous bills in order to determine how much to charge customers.

You will therefore pay the same price regardless of how much gas or electricity you consume based on the agreement you have with your supplier. This means that if there are any energy efficiency changes in a particular household which would enable a lower consumption rate, you might end up paying more than you need. Instances include when a member of the family moves out, switching to a more efficient boiler or improving the home's insulation.

Which tariff is best?

It all depends on the customers personal needs. For example, a person in need of budgeting their energy bills could benefit from a prepayment tariff whilst someone working night shifts would benefit more from an economy 7 tariff.

An energy supplier should inform its customers of all of their options and help them choose the one that is best for them.

Energy Billing

Energy suppliers issue energy bills to their customers that are based on how many units of energy they have consumed.

When a customer submits a meter reading (or the reading is sent automatically if the consumer has a smart meter) the energy company will subtract the amount shown on the previous meter reading to calculate the bill.

If a reading isn’t received by the supplier, then they will issue an estimated bill which is calculated based on the consumers' past usage or a standard rate.



Read more: Energy Billing – How does it work?

How can Dyball help

Energy supply companies can get in contact with Dyball Associates to learn more about how our CRM and energy billing solutions can assist them to manage their energy billing process.



Dyball’s CRM incorporates an energy billing system that allows the scheduling and ad-hoc bill production to a bespoke branded billing template. The electricity and gas billing software effortlessly integrates with direct debit partners and helps automate a supplier’s billing and collection processes.



Read more: Gas and Electricity Billing Software & CRM System for Energy Suppliers

Further Reading

How does the UK Energy Market work Part 1 – Energy Prices and entering the energy market



Digital Only Energy Supplier announced by Centrica



Back to normality for the Energy Sector from July 1st and Ofgem says debt collecting can resume



Dyball Associates are proud to help new supply businesses successfully launch in the UK market.

Through our energy market consultancy service, and the energy industry software we’ve developed, we’re supporting new UK electricity and gas suppliers get set up and start supplying.

For more information on how to start and manage an energy company, get in touch with Dyball Associates today.