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# Household Electricty Costs

Electricity expense is one of the key elements of every household's budget after mortgage/rent and council tax. As per Government statistics, the average annual bill in 2013 for a UK household was £555 per year.

### How much has electricity expense increased over the years?

Since 2003, the average annual electricity bill has more than doubled, when it was £267 per annum. According to reports, this figure is likely to go even higher in the coming years. Electricity expense has increased at a much higher rate than the increase in wages over the same period.

### How can you save on your electricity expenses?

One way to save on electricity expenses is by checking different deals, and by comparing electricity plans from different suppliers. This way you can choose the most cost-efficient option to suit your household's finances. There are several websites that provide comparison of tariffs from different electricity providers. Some of these websites even offer a cashback or reward if you switch your provider through them. However, before switching, you need to confirm if your previous contract is time-bound, and whether you will have to pay any penalty for ending the contract before its term.

#### Example:

Suppose you stay in Dorset County with a postcode of TA20 4QB. Your yearly electricity expense is £500, and your average electricity consumption is 2,701 kWh per year. If you go to a deal site, and enter these basic details, you can get several cost-effective options starting from as low as £407 per year.

### What are fixed and variable tariff plans?

In a fixed tariff, your price per unit will be fixed for a pre-decided period, whereas, under variable tariff, your price per unit can vary.

The example above is of a variable tariff plan. In this deal, the company can increase the unit rate (in this case, 12.370p) anytime to match external prices. So if the company decides to increase the unit rate, you may have to pay higher than £407 even if your electricity consumption remains constant. Thus, under variable plan, your bill depends on any increases or decreases in your electricity consumption as well as on any price increases by the service provider.

The advantage of fixing your tariff is that you can better plan your household's electricity cost in advance. Note that even with a fixed tariff, only your rate per unit is fixed, and the total payable is still dependent on your consumption. To continue with the above example, you may get a 1-year fixed price deal, which offers you an annual payment of £424. As opposed to the earlier plan, your unit rate will be fixed at 13.472p per kWh. So if your annual consumption remains the same, your annual electricity expense will be roughly around £424. However, if your consumption goes up, you will still end up paying higher.

### Savings by choice of payment method

Your choice of payment method can also have some impact your electricity expenses. Direct debit is the most inexpensive payment method when compared to other methods such as payment upon receipt of the bill, or payment based on a prepayment meter.

Use our household budget calculator to check how electricity expenses can impact your household finances.

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