Comparing Energy Tariffs: Annual Costs, Labels and Projections

Comparing energy tariffs sounds simple until you see how differently suppliers present their prices. One quotes an estimated annual cost, another leads with a unit rate, and a third pushes a reward scheme. The way to compare like for like is to understand the three things every supplier must publish: the estimated annual cost, the Tariff Information Label and the unit rate and standing charge behind them. This page explains what each of those means, what consumption assumptions sit underneath the headline figures, and how to check that a comparison site is giving you a fair answer.

The single number most people see first is the estimated annual cost of a typical household. From 1 October 2026 the Ofgem price cap for a typical dual-fuel household paying by direct debit is £1,723 a year, up from £1,663, an increase of about £60 for the October to December 2026 period¹. That figure is not a cap on your bill: it is what the cap's unit rates and standing charges produce when applied to a defined "typical" level of consumption. Use more than the typical amount and you pay more; use less and you pay less. Understanding what sits behind that number is what makes tariff comparison possible.

How the Ofgem cap affects what you pay each year

The price cap sets a maximum on the unit rates and standing charges a supplier can apply to default tariffs. It is not a cap on the total bill, and it never has been: a household that uses twice the typical amount of energy pays roughly twice the variable part of the bill. What the cap does is limit what a supplier can charge per unit of gas and electricity, plus the daily standing charge, on tariffs that customers have not actively chosen.

The cap applies where a customer has not signed up for a fixed-term contract with their supplier⁷. Ofgem states that it does not matter how you pay your bills, whether by direct debit or another method: the cap applies to these default tariffs regardless of payment method⁸. Customers on a default tariff paying by standard credit, direct debit, prepayment meter or Economy 7 meter are all covered⁴. What the cap does not protect are fixed tariffs, business energy contracts, heat networks and heating oil⁹.

The headline figure of £1,723 for the October to December 2026 period follows a period of smaller movements. For October to December 2025, Ofgem reported that a typical household on a default tariff would pay £102 for what previously cost £100 per month, a rise of about 2%⁶. Earlier cap levels were substantially higher: the Scottish Government's fuel poverty analysis for January to March 2024 modelled households "under the price cap of £1,928 for the typical dual fuel household"¹⁰, and Ofgem's own cap documentation for April to June 2024 was set on the same consumption basis¹¹. The direction of travel matters less for comparison than the mechanism: every quoted annual figure is the cap's unit rates and standing charges applied to a fixed consumption benchmark.

For a household thinking about energy independence, the cap is a backstop, not a plan. It limits the cost of dependence on a supplier's default tariff, but it does nothing to reduce how much energy you need. The comparison work on this page is about paying a fair price for what you buy; reducing what you buy is a separate project.

The benchmark figures used to compare energy deals

Every "typical annual bill" figure you see, from Ofgem, from suppliers and from comparison sites, is calculated by applying prices to Typical Domestic Consumption Values, or TDCVs. Ofgem explains their purpose plainly: "We use typical domestic consumption values (TDCV) to give you an idea of how much energy you could use in a year, which can help you to understand your bill"⁹.

The values currently used for bill figures are 2,700 kWh for electricity, 11,500 kWh for gas, and 3,900 kWh for multi-register meters, as used in Ofgem's cap documentation for October to December 2025². Ofgem's February 2025 cap letter confirmed that all its figures reflected the latest 2023 TDCVs¹³. The values are not plucked from the air: they are "derived using an established methodology utilising the Department for Energy Security and Net Zero (DESNZ) sub-national consumption statistics, based on median consumption"¹⁴. A median means half of households use less and half use more, which is worth remembering when a headline figure is presented as what "the average home" pays.

Older documents show how the benchmark has moved. The wholesale costs review of December 2023 worked from 3,100 kWh for single rate electricity and 12,000 kWh for gas¹³, and the April to June 2024 cap level used the same 12,000 kWh gas basis¹². When you compare an annual figure from one year with one from another, check whether the consumption basis changed as well as the prices, because a fall in the quoted annual cost can partly reflect a lower assumed usage rather than cheaper rates.

Ofgem's current approach is to review the TDCVs every two years, in line with its established framework³. The most recent review took effect from 1 July 2026 and lowered the electricity benchmarks, as the next section sets out.

Working out whether you use a little or a lot

The 2026 review of typical domestic consumption values introduced explicit low, medium and high usage levels, which is a significant improvement for anyone comparing tariffs, because a deal that looks good for a medium user can look different for a small or large one. For electricity on Profiles Class 2 meters, the new values from 1 July 2026 are 1,900 kWh a year for low users, 3,400 kWh for medium users and 6,100 kWh for high users³.

The reductions reflect falling median consumption, driven in part by more efficient homes and appliances. Ofgem's energy terms glossary also describes a low user as one who annually uses around 2,100 kWh of electricity and/or 11,000 kWh of gas¹⁵, a slightly different framing that predates the new Profile Class 2 values; the two figures differ, and the newer decision document is the one to work from³.

Where a household sits among these levels depends on the property and how it is heated. Official statistics from the National Energy Efficiency Data Framework show that for flats, median gas and electricity consumption was higher, by 1% and 7% respectively, in properties built in 2023 compared with those built in 2010¹⁶, a reminder that even within one property type the spread is wide. The English Housing Survey collects data on whether households have changed their fuel supplier or tariffs and the payment methods they use¹⁷, which is the evidence base behind much of what is known about switching behaviour.

The practical point for comparison is simple: find your own annual kWh figures from your bill or online account before comparing, and treat the low, medium and high benchmarks as a sanity check. A household with a heat pump, an electric vehicle or a home battery will sit far from the median in shape as well as size, and for those homes the time-of-use structure of a tariff matters as much as its headline rate.

The two charges that make up your energy bill

Underneath every annual projection sit two numbers. Your unit rate is how much you pay for each unit of gas or electricity you use. Your standing charge is the daily fixed cost of supplying gas and electricity to your home¹⁸. There is only one charging structure made up of a standing charge and the unit prices of the gas and electricity¹⁹.

The standing charge is the part of the bill that does not respond to behaviour. It accrues every day regardless of use, which is why two tariffs with the same unit rate can produce noticeably different annual costs, and why a low-usage household can be hit proportionally harder by a high standing charge. Ofgem has consulted on a requirement to offer lower standing charge tariffs, seeking views from energy suppliers, consumers and the public, consumer groups, charities, industry groups and network companies²⁰, a sign that the structure of the charge, not just its level, is under active scrutiny.

When comparing tariffs, the factors to weigh go beyond the two headline numbers. Independent guidance lists unit rates and standing charges, whether prices are fixed or can change, the length of any fixed-term contract, the payment methods available, customer service and support, and any additional benefits or incentives¹⁸. A tariff with a slightly higher unit rate but a much lower standing charge can be cheaper for a low user, and the reverse holds for a high user. This is exactly why the estimated annual cost, calculated on your own usage, is a better comparison figure than either number alone.

For a household aiming at energy independence, the standing charge is the irreducible cost of being connected. Solar panels, a battery and shifted consumption can cut the unit-rate part of a bill towards zero, but the daily charge is paid for as long as the home remains connected to the network. That is the dependence that remains after every efficiency measure, and it belongs in any honest calculation of what independence costs and saves.

Reading each line of the Tariff Information Label

The Tariff Information Label, or TIL, is the standardised sheet of key facts that a supplier must produce for each of its tariffs. The requirement sits in Standard Licence Condition 31F.11: "Suppliers must prepare a Tariff Information Label for each of their tariffs (SLC 31F.11). This no longer has to follow a set format but must be a clear and comprehensible list of key features in a consolidated format allowing easy comparison"²¹.

The label was created as part of the retail market reforms of the early 2010s. Ofgem announced in 2013 that "a new tariff information label will set out key terms and conditions as well as relevant information to help consumers compare across suppliers"²². The earlier statutory consultation worked through the details, including the rule that "where all other aspects of the tariff are equal, including the charges, then one label should be produced" rather than several labels varying only by payment method²³.

The label belongs to a family of communications rules introduced at the same time. Suppliers' switching information requirements covered telling the consumer if there are other cheaper tariffs they could switch to with the same supplier, the cheapest tariff message, estimated annual costs, and an "about your tariff" label²¹. The estimated annual cost is the line that makes cross-supplier comparison possible, because it applies the tariff's own unit rate and standing charge to a common consumption figure.

To use a comparison service or to check a switch, you need certain information about your current deal: your postcode, the name of your current supplier, the name of your current tariff, the amount you pay for your energy per unit in kilowatt hours, and the amount of energy you use each year²⁴. You can usually find this information on your latest energy bill or statement, or in your app or online account¹⁸. Ofgem's guide to understanding your electricity and gas bills covers where each element appears and what it means⁵.

Matching tariff types to their labels

Ofgem describes three main types of tariff: fixed rate, the standard variable tariff (SVT) and the multi-rate tariff⁵. The standard variable tariff is the default deal a customer lands on when a fixed term ends or when they have never switched, and it is the tariff the price cap protects. Fixed tariffs lock the unit rate for a set period; Ofgem's consumer research tested options of 12 months fixed term, 24 months fixed term and standard variable when exploring how people choose²⁵.

Time-of-use tariffs change the shape of the comparison entirely. A time-of-use tariff is "a plan where the price of a unit of energy varies during a 24 hour period"²⁶. With dynamic time-of-use tariffs, "energy prices can vary continually and are calculated in real-time depending on various factors"²⁶. For these deals, a single annual figure calculated on flat usage tells you very little, because the cost depends on when you use energy, not just how much.

That has consequences for how you read a TIL. On a fixed or variable tariff, the estimated annual cost is a solid like-for-like measure. On a time-of-use tariff, the label's rates for each period matter more than the blended annual figure, and a household that can shift consumption into cheap periods, with a home battery, storage heaters or electric vehicle charging, can do far better than the projection suggests. The reverse is equally true: a household that cannot shift may do worse.

The research base behind these choices is substantial. Ofgem's study of consumer tariff choices was conducted with 3,235 energy bill paying adults from across Great Britain²⁷, and its separate work on what drives satisfaction with suppliers found that having switched supplier or tariff explained 5% of the variance in one model and 0.6% of total variance²⁸. Switching matters, but it is one factor among several in how households feel about their energy deal.

The 0% VAT cut on household electricity explained

For years, domestic energy bills in the UK carried VAT at 5%, and Ofgem's own guides to bills and bill calculations still show VAT at that rate in their standard breakdowns⁵. That changed on 1 October 2026. The government introduced "a temporary zero rate of VAT for qualifying supplies of domestic electricity in Great Britain" running from 1 October 2026 to 31 March 2027³¹. The announcement of the measure stated that the "tax cut this year funded from cancelled Digital ID programme will see VAT on electricity bills removed from October 1"³².

Two things follow for tariff comparison. First, the zero rate applies to domestic electricity in Great Britain, so gas continues to carry VAT at 5%, and the electricity lines on bills and projections produced before 1 October 2026 will not match what arrives afterwards. Second, the relief is temporary as legislated, with an end date of 31 March 2027, so any annual projection that spans that date is blending two VAT positions. When comparing an estimated annual cost quoted today with one quoted earlier, check whether the electricity VAT treatment is consistent.

The change also interacts with the price cap. The cap level of £1,723 taking effect on 1 October 2026 applies in the same period the VAT cut begins, so the movement in a typical electricity bill over that quarter reflects both the cap's rise and the VAT removal. Suppliers apply the zero rate to qualifying supplies; a household does not need to claim it.

Price cap reviews and what may change next

Ofgem reviews and sets the cap every three months, fixing the maximum unit rates and standing charge a supplier can apply to default tariffs⁴. The Welsh Government's explainer puts it the same way: "Ofgem updates the price cap every three months"⁸, and the House of Commons Library briefing notes that "the regulator Ofgem revises the cap each quarter"⁷. Each quarterly review reflects updated estimates of wholesale costs and the other allowances built into the cap.

Beyond the quarterly cycle, several structural reviews are in progress or recently concluded. Ofgem's review of historical debt-related costs consulted on a proposal to "include costs and revenues across all tariff types, not just customers on variable tariffs", with a response deadline of 16 June 2026³³. The wholesale costs review that concluded in 2023 had set its own response deadline of 17 January 2024, and noted that any changes to the cap would at the very earliest be made as part of the update for the July to September 2024 cap period¹³. A separate review of operating cost allowances was run by Ofgem's Consumer Protection and Retail Markets team³⁴.

For a household comparing tariffs, the practical implication is that the cap, the TDCVs and the cost allowances beneath them all move on different timetables. A projection that is right this quarter may be wrong the next, not because the supplier changed anything but because the benchmark did. Fixed tariffs insulate a household from the quarterly cap movements for their term, at the cost of losing any falls; variable tariffs track the cap. The choice between them is covered in our guide to fixed-rate energy tariffs and the comparison in fixed vs variable tariffs.

How to vet comparison sites and suppliers

Not every comparison service is equal, and the first check is accreditation. Official consumer guidance from Wales states: "It is advisable to use price comparison websites that are accredited by Ofgem (the UK gas and electricity regulator)"¹⁹. Ofgem's Confidence Code is that accreditation scheme, and using an accredited site is the simplest way to ensure the prices shown are complete and presented on a consistent basis.

The picture differs by nation. The Ofgem cap and the comparison market it shapes operate in Great Britain. In Northern Ireland, the Consumer Council offers an energy price comparison tool covering electricity and gas tariffs for all suppliers in Northern Ireland³⁵, and nidirect carries separate advice for households struggling to pay their energy bills³⁵. If you are comparing deals from Northern Ireland, use the Northern Ireland tools rather than Great Britain sites.

The second check is the supplier itself. Ofgem's research on what drives consumer satisfaction with energy suppliers examined the factors behind how households rate their supplier²⁸, and its tariff choices research with 3,235 bill-paying adults across Great Britain explored how people actually decide²⁷. Independent guidance on checking your tariff and switching lists the factors worth weighing alongside price: customer service and support, and additional benefits or incentives, as well as the rates themselves¹⁸.

A final note on what comparison can and cannot do. An Energy Performance Certificate is produced using standard information about buildings, allowing buyers and tenants to compare energy efficiency and likely heating and lighting costs before entering a contract³⁶; it is the property-side analogue of the TIL's tariff-side standardisation. Both help you compare what is on offer. Neither reduces what you depend on. A cheaper tariff lowers the price of the energy you import; it does not change the fact of importing it. For that, the relevant question is how much of your consumption you can generate, store or shift yourself, and which tariff structures reward you for doing so.