Energy Tariff Comparison Rates explained

It’s now easier than ever to compare gas and electricity tariffs and switch supplier, and you can be switched to a new supplier in the time it takes to make a cuppa.

But it’s not always been quite so simple, and energy companies have long been criticised not only for making their tariffs to complicated, but also for having too many tariffs available at any one time.

It was believed that over complication and too much choice was deterring consumers from switching, and so Ofgem, the energy regulator, stepped in to make some market-wide changes.

There's no price cap on business energy. Compare deals to find cheaper prices than your supplier's out of contract rates.

One of those changes was to introduce an energy comparison rate formula, to make comparing deals a whole lot easier. The tariff comparison rate came into effect in 2014, but was rolled back for energy switching sites as of June 2017. Here’s how Ofgem simplified the market, to help take the hassle out of energy tariff comparison.

Simpler energy tariff comparisons

The energy market used to be a complicated place for consumers, with a mind-numbing number of tariffs on offer, each with a range of tiered unit rates and seemingly random rates on standing charges.

So, back in 2010, Ofgem launched its Retail Market Review, a root-and-branch investigation aimed at making the energy market clearer, simpler and fairer for consumers. One of the outcomes of that review were to ban suppliers from offering complex tariffs, while another was to introduce a tariff comparison rate (TCR), which could be used as a first point of comparison when comparing tariffs, as it reduced the costs of a tariff into one p/kWh figure.

What is a tariff comparison rate?

The aim of Ofgem’s TCR was to make it easier for customers to compare electricity and gas tariffs, particularly different deals across different providers. In this respect, it worked in much the same way the APR% rate does for loans and credit cards.

The TCR was represented a single figure that takes into account any standing charges, unit rates and discounts that go into providing a tariff’s overall cost. This allowed customers to simply compare the TCR of one tariff against another - either from the same supplier or a different supplier - and instantly be able to see which one is cheaper.

Energy suppliers were also required to print tariff comparison rates on all communications between themselves and customers.

How to calculate the tariff comparison rate

The Ofgem tariff comparison rate used the following calculation to work out energy comparison rates between tariffs:

  • Multiply unit rate by Ofgem's average consumption figures – 3,100 kWh for electricity and 12,000 kWh for gas
  • Add a year's standing charge i.e. Standing Charge x 365 days
  • Subtract any discounts applicable
  • Add VAT at the current rate
  • Divide this figure by 3,100 (electric) or 12,000 (gas) to give us the tariff comparison rate in pence per kWh

Why has the tariff comparison rate been removed?

Tariff comparison rates came into effect from March 31, 2014, but were subsequently removed as of June 23, 2017, when the Competition and Markets Authority (CMA) and the energy regulator both agreed that the system was not effective in helping consumers make informed choices when comparing energy tariffs.

The system was seen as flawed as it only took basic costs into account, and didn't consider any other added value elements of tariffs – as we always say, cost is most likely the main reason for switching, but other factors, such as customer service levels, should also be considered when you compare energy tariffs.

Ofgem have decided that all references to TCR in customer communications should be removed - this is a mandatory change across all energy suppliers.

How to compare gas & electric tariffs

The simplest way to compare gas and electricity tariffs is to let us do all the hard work for you – to get started, simply enter your postcode in the box at the top of the page.

This will then take you to our energy comparison engine, where you just need to enter a few more details about where you live and your current supplier. Once we have this information, we’ll instantly compare the best deals on offer, and present you with an energy tariff comparisons table, highlighting how much each deal could save you.

How to get the best energy deal

Switching energy supplier is a quick and simple way to knock hundreds of pounds off the cost of your annual energy bills – but with so many suppliers offering so many different tariffs, choosing the best one can be a bit tricky. The simplest way to see what deals are on offer is to run a price comparison with UKPower.

 

Once you’ve found a deal you like, we’ll take care of the rest, and you’ll be switched to your new supplier within 17 days, which includes a 14-day cooling off period. And there’ll be no need for any digging or drilling at your property, as your gas and electricity will still enter through the existing pipes and cables.