Energy Terms Explained | So Energy

With the rising cost of energy continuing to dominate the headlines, we understand you may have questions about what is happening, and what it means for you and your bills.

For full details on the current situation, including answers to some of the questions we’re being most commonly asked at the moment, see our recent blog here.

We’re also aware that there are a number of terms and phrases being used in the news coverage that can be quite confusing. We’ve put together a short glossary of energy terms, to help you understand some of the jargon you might be coming across.

Dual fuel

A type of energy contract where a customer takes both gas and electricity from the same supplier.

Default energy tariff

An energy tariff is what an energy provider, like us, charges a customer for their gas and electricity use. There are a few different types of tariff, which we’ll explain here, and a default energy tariff is essentially the basic tariff offered by a supplier.

You could be put on a default tariff if you've not chosen an energy tariff (for example if you've just moved into a new home and not agreed a new tariff), or if your fixed-term tariff ends and you've not selected a new tariff. The most common form of default tariff is a ‘standard variable tariff’ (see below).

Energy UK

Energy UK is the trade association for the energy industry. It’s a trade association’s role to represent organisations operating within a particular field, and Energy UK represents over 100 companies involved in the UK’s energy sector. It’s likely you’ll have seen a spokesperson from the Energy UK being interviewed or quoted in some of the news coverage around the current situation.

Fixed price tariff (or fixed rate tariff)

A fixed price tariff means that the price charged per kWh for gas/electricity will not change (is fixed, in other words) for a set period of time. In the immediate term, a fixed price tariff will likely increase how much you’re paying. However, you may prefer the stability and to be protected from predicted future increases in the price of energy.

kWh (kilowatt-hour)

kWh, or a kilowatt-hour is a unit used to measure energy consumption in both electricity and gas.

Ofgem

Ofgem (the Office of Gas and Electricity Markets) is the government regulator for the UK’s gas and electricity sector. Ofgem is responsible for making decisions about things like price caps (see below) and enforcement, acting in the interest of customers.

Price cap

The energy price cap is a limit on how much energy suppliers can charge customers per unit of gas or electricity. Calculated by Ofgem, it acts as backstop protection because it limits the rates a supplier can charge for their default tariffs.

The price cap only applies to providers' standard and default tariffs, so if you’re on a fixed price tariff (see above) the cap doesn’t apply. If you've not switched in the last year or so, it's likely you're on a price capped tariff. Similarly, if your supplier has stopped trading and you are switched to a new supplier you are probably on a capped tariff.

Bear in mind that price caps don’t limit your total bill, as this varies depending on how much energy you use.

The price cap is reviewed by Ofgem regularly, and the next announcement will be on 7th February.

Prepayment meter

Prepayment meters are a type of energy meter (a device used to measure energy use) that requires users to pay for energy before using it. This type of ‘pay as you go’ energy works like topping up a mobile phone - you have to top-up with credit to get your gas and electricity.

Standard variable tariff (SVT)

A standard variable tariff is most energy suppliers’ basic offer; it’s a contract with an indefinite length, that does not have a fixed-term. A SVT means that the price you pay for your energy will increase and decrease in line with the price of wholesale energy. At So Energy, we’ll always let you know 30 days before any increases in what you’ll be paying.

VAT
VAT on domestic fuel bills in the UK is currently charged at 5%. One of the measures that the Government is said to be considering, in response to the current situation, is cutting that VAT. However, no final decision has yet been announced.

Warm Home Discount

The Warm Home Discount is a scheme for lower income households, offering payment of £140 to help people on lower incomes pay for their energy. The scheme has cropped up in some of the recent news coverage, with reports that the Chancellor is considering expanding the discount in order to help more households.

Wholesale costs

Wholesale costs refers to the amount energy companies, like So Energy, pay to buy gas and electricity which we then sell to you. Wholesale costs can change regularly; we explain why here.