Why your bill deserves ten minutes of your time

Most of us glance at the bottom line, wince, and file the bill away. Understandable — but that single number hides a great deal of detail, and in that detail is everything you need to check you are being charged correctly and to compare what you are paying with the rest of the market. Your bill is a receipt, a forecast and a set of instructions in one. Grab your latest statement, plus one from the same month last year if you have it, and read on.

The two halves of every bill: usage and standing charges

Every domestic energy bill splits your charges into two pots. The first is usage: the kilowatt hours (kWh) of gas and electricity you have actually consumed. The second is the standing charge: a fixed daily amount you pay simply for being connected, whether you use any energy or not.

Standing charges cover keeping you on supply, maintaining the network and, for electricity, funding schemes such as the Warm Home Discount. They are quoted in pence per day, so 60p a day is roughly £219 a year. If you take both gas and electricity, you pay two standing charges.

• Usage charges rise and fall with what you use, so they are the ones you can influence.
• Standing charges stay the same all year. You cannot lower them by using less, but they differ between tariffs — which matters a great deal when comparing deals.

That distinction is the most useful thing to grasp. A low unit rate paired with a high standing charge can cost a small household far more than the reverse.

Your tariff details, in plain terms

Near the top of the bill you will find the name of your tariff, the date it ends if it is fixed, and your rates. Both fuels are priced in pence per kWh, though gas is converted from cubic metres, which is why the figures look different from your meter. Look for:

• Unit rate for each fuel. Check whether it is a single rate or split, as with Economy 7, where overnight electricity is cheaper.
• Standing charge for each fuel, in pence per day.
• Tariff end date and any early exit fees, usually charged per fuel.
• Payment method — direct debit is normally cheaper than paying on receipt of the bill.

On a variable tariff, rates change when wholesale costs or the price cap move. Your supplier must tell you in advance, so keep an eye on the small print.

Actual or estimated? The reading that changes everything

Find the meter reading section. Beside each figure you will usually see a letter: A for actual, C for a reading you supplied yourself, or E for estimated. Estimates are the most common source of nasty surprises.

A bill built on estimates is a guess, and over several months those guesses can drift a long way from reality in either direction. The fix is simple: send a reading yourself, or check that your smart meter is transmitting automatically. Then confirm the reading on the bill matches your meter, and that the meter serial number on the statement matches the one printed on the meter itself. Mix-ups are surprisingly common in flats and shared buildings.

Checking the arithmetic and your balance

With readings and rates in hand, the maths is easy enough to sanity-check:

• Subtract last period's reading from this one to get your kWh used.
• Multiply by the unit rate and divide by 100 to turn pence into pounds.
• Multiply the standing charge in pence by the number of days in the period, then divide by 100.
• Add the two, apply VAT at 5%, and subtract any credit, discount or payment already made.

If your total lands within a pound or two of the bill, all is well. If it is wildly out, ring your supplier and ask them to explain the difference — they are obliged to look into it.

Check the balance as well. With direct debit, payments are smoothed across the year, so you build credit in summer and spend it in winter. That is normal. A steadily growing debt, or credit that is never reviewed, is not. Ask for a payment review if the balance has drifted far from about one month's usage. Finally, scan for credits due to you, such as the Warm Home Discount or a refund after a meter change.

Using your bill to compare deals properly

To compare tariffs fairly you need two things: your annual usage in kWh for each fuel, and the standing charge and unit rate of every deal you are weighing up. Your bill or online account will show an annual usage estimate.

Run the sums with your own usage rather than the typical household figures used in advertising — those assume average consumption and can be badly misleading. A small home, or one that sits empty during the day, usually benefits from a lower standing charge, while a household running plenty of appliances will feel the unit rate more keenly. Getting this right is the difference between a genuine saving and a headline that never quite materialises.