Two energy tariffs can look easy to compare, but headline prices and monthly payments can be misleading. Learn how to compare unit rates, standing charges and other costs using the same household energy consumption.
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Energy Bills
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9 min read
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Likewise Compare
Comparing two energy tariffs should be simple.
Look at the two prices, choose the cheaper one and you’re done.
Except energy tariffs aren’t usually presented that neatly.
One offer might show an estimated annual cost.
Another might show a monthly Direct Debit.
One might have a lower unit rate but a higher standing charge.
Another might offer very cheap electricity at certain times of day.
And a tariff described as saving you £200 isn’t necessarily going to save your household £200.
So how do you compare two energy tariffs properly?
The starting point is simple:
Compare both tariffs using the same household energy consumption and the same assumptions.
Then calculate what each tariff would actually cost.
What numbers do you need to compare energy tariffs?
For a straightforward gas and electricity tariff, start with:
your annual electricity consumption in kWh
your annual gas consumption in kWh
electricity unit rate
electricity standing charge
gas unit rate
gas standing charge
tariff length
exit fees
any discounts or additional charges that genuinely apply
If you’re comparing a time-of-use tariff, you’ll also need to know how much electricity is likely to be used during each charging period.
Ofgem says actual historic consumption should be used when available when estimating annual energy costs.
That’s why your own kWh consumption is such an important part of a meaningful comparison.
Start with your actual energy consumption
Imagine your household uses:
Electricity: 2,500 kWh/year
Gas: 9,000 kWh/year
Those numbers should stay the same when we compare the tariffs.
We’re not going to calculate Tariff A using 2,500 kWh of electricity and then calculate Tariff B using somebody else’s typical consumption.
We’re asking a much more useful question:
What would each tariff cost the same household?
That gives us a like-for-like comparison.
Let’s compare two tariffs
Suppose you’re considering these two illustrative tariffs.
Tariff A
Electricity unit rate: 24p/kWh
Electricity standing charge: 60p/day
Gas unit rate: 7p/kWh
Gas standing charge: 30p/day
Tariff B
Electricity unit rate: 26p/kWh
Electricity standing charge: 45p/day
Gas unit rate: 6.8p/kWh
Gas standing charge: 32p/day
At first glance, neither tariff is obviously cheaper.
Tariff A has the cheaper electricity unit rate.
Tariff B has the cheaper electricity standing charge.
Tariff B also has the cheaper gas unit rate.
But Tariff A has the cheaper gas standing charge.
So we need to calculate the whole tariff.
Step 1: Calculate the electricity cost
Our household uses:
2,500 kWh/year
Tariff A electricity usage
2,500 × £0.24 = £600
Electricity standing charge:
365 × £0.60 = £219
Total electricity cost:
£819
Tariff B electricity usage
2,500 × £0.26 = £650
Electricity standing charge:
365 × £0.45 = £164.25
Total electricity cost:
£814.25
Despite Tariff A having the lower electricity unit rate, Tariff B is:
£4.75 cheaper for electricity
for this particular household.
That’s why comparing unit rates alone can give you the wrong answer.
Step 2: Calculate the gas cost
Our household uses:
9,000 kWh/year
Tariff A gas usage
9,000 × £0.07 = £630
Gas standing charge:
365 × £0.30 = £109.50
Total gas cost:
£739.50
Tariff B gas usage
9,000 × £0.068 = £612
Gas standing charge:
365 × £0.32 = £116.80
Total gas cost:
£728.80
Tariff B is:
£10.70 cheaper for gas
Step 3: Calculate the total annual cost
Now combine electricity and gas.
Tariff A
Electricity: £819
Gas: £739.50
Total:
£1,558.50
Tariff B
Electricity: £814.25
Gas: £728.80
Total:
£1,543.05
Difference:
£15.45
Tariff B is cheaper in this example.
But notice how small the difference actually is.
Looking only at individual rates wouldn’t have told us that.
The basic tariff comparison formula
For a straightforward electricity tariff:
Annual electricity cost =
(annual electricity kWh × electricity unit rate) + (electricity standing charge × 365)
For gas:
Annual gas cost =
(annual gas kWh × gas unit rate) + (gas standing charge × 365)
Then:
Estimated annual energy cost = electricity cost + gas cost
After that, account for relevant fees, discounts or other tariff features.
This simple calculation is one of the most useful ways to understand what you’re actually comparing.
Why shouldn’t you just compare the monthly Direct Debit?
Because your Direct Debit is a payment arrangement.
It isn’t the tariff itself.
Citizens Advice explains that Direct Debit payments are usually based on an estimate of the amount of energy you’ll use over a year. Payments can also change if your actual usage differs from the supplier’s estimate.
Imagine:
Current Direct Debit: £140/month
New tariff quote: £125/month
It would be tempting to calculate:
£140 − £125 = £15
£15 × 12 = £180 saving
But that doesn’t prove the new tariff is £180 cheaper.
The two monthly figures may have been calculated using different consumption assumptions, account balances or payment adjustments.
Compare the underlying tariff instead.
Don’t compare one tariff using your consumption and another using typical consumption
This is another easy way to distort a comparison.
Suppose your household uses:
2,500 kWh electricity
but one tariff quote is calculated using:
2,700 kWh
The resulting annual costs aren’t directly comparable.
Ofgem’s methodology for estimated annual costs specifically says the same relevant assumptions should be used consistently across tariffs being compared.
So if you’re comparing two tariffs yourself, use:
2,500 kWh vs 2,500 kWh
not:
2,500 kWh vs 2,700 kWh
The household hasn’t changed just because the tariff has.
Compare the same time period
The comparison period matters too.
A three-month price-cap period shouldn’t automatically be treated as though its rates tell you exactly what you’ll pay for the following 12 months.
Ofgem reviews the price cap every three months, and the actual amount a household pays depends on factors including consumption, location and meter type.
So make sure you’re clear about what each figure represents.
Are you comparing:
12 months against 12 months?
Or:
a fixed 12-month tariff against an assumption about future variable rates?
Those are different comparisons.
The second involves uncertainty because future variable rates can change.
Don’t assume the price cap is your annual bill
From 1 October to 31 December 2026, Ofgem’s average Direct Debit price-cap rates are:
Electricity: 26.32p/kWh
Electricity standing charge: 54.83p/day
Gas: 7.97p/kWh
Gas standing charge: 29.68p/day
These are averages across England, Scotland and Wales.
But the price cap doesn’t mean every household pays the same total amount.
Ofgem explicitly says actual costs depend on how much energy you use, where you live and your meter type.
So use the rates relevant to your household and apply your own consumption.
Include exit fees when they’re relevant
Suppose:
Tariff A costs £1,600
Tariff B costs £1,500
At first sight:
Tariff B saves £100
But imagine leaving Tariff A today incurs a:
£75 exit fee
Your immediate net benefit becomes:
£100 − £75 = £25
That doesn’t necessarily mean you shouldn’t switch.
It means the £75 belongs in the calculation.
And if you’re already within the final 49 days of an eligible fixed tariff, the position can be different because you can switch without the contractual exit fee.
The important principle is:
Include costs that genuinely apply to the decision you’re making.
Special tariffs need another layer of calculation
The basic formula works well for ordinary single-rate tariffs.
But some tariffs require more information.
For an Economy 7 tariff, you need to know how much electricity you use during the cheaper night period.
For a time-of-use tariff, you need to divide consumption between the different charging periods.
For an EV tariff, you need to consider how much charging can genuinely be shifted into the cheap overnight window.
For a low-standing-charge tariff, your total consumption can determine whether the higher unit rate outweighs the standing-charge saving.
The principle is still the same:
Apply your usage pattern to the tariff’s actual charging structure.
Cheapest doesn’t always mean lowest unit rate
Our worked example demonstrated this.
Tariff A had the cheaper electricity unit rate:
24p/kWh vs 26p/kWh
Yet Tariff B produced the lower electricity cost for our 2,500 kWh household because its standing charge was lower.
The reverse can happen for a high-consumption household.
As consumption increases, differences in the unit rate become increasingly important.
That’s why unit rates and standing charges need to be considered together.
What about discounts and rewards?
Include them when they’re genuinely part of the tariff and you’re eligible to receive them.
But distinguish between:
guaranteed savings
and
conditional benefits.
For example, a benefit requiring you to charge an EV during particular hours only has its full value if your household can actually use it that way.
Likewise, don’t allow a one-off incentive to hide a tariff that costs substantially more over the period you’re comparing.
The objective is to understand the whole financial effect.
A £15 difference may not be a meaningful difference
Our example produced:
Tariff A: £1,558.50
Tariff B: £1,543.05
Difference:
£15.45/year
Technically, Tariff B wins.
But the comparison has also told us something else:
The tariffs are very close.
That matters.
If switching supplier saves £15.45 over an entire year, you might decide other considerations are more important.
You might prefer your existing supplier.
You might value a tariff with no exit fee.
You might prefer greater price certainty.
Or you might still choose the cheaper option.
Likewise Compare shouldn’t make that decision for you.
The calculation should make the difference clear enough for you to decide.
The five rules for comparing energy tariffs properly
If you remember nothing else, use these five rules:
1. Use your own consumption
Use actual annual kWh wherever you have it.
2. Use the same consumption for every tariff
Don’t change the household halfway through the comparison.
3. Compare unit rates and standing charges together
A low rate in one part of the tariff can be offset by a higher charge elsewhere.
4. Compare the same period
Be especially careful when comparing a fixed tariff with future variable rates that aren’t yet known.
5. Include costs and conditions that genuinely apply
Exit fees, charging windows and other tariff conditions can change the result.
So which tariff is actually cheaper?
You can’t reliably answer that from a headline unit rate or monthly payment alone.
You need to know:
How much energy does the household use?
What does each tariff charge for that energy?
What fixed charges apply?
Are there additional costs or conditions?
Then apply the same household information to each option.
That’s the comparison.
And it’s the principle behind Likewise Compare:
Same household. Same usage. Same assumptions.
Then let the numbers show whether staying or switching offers better value.
Compare the tariff, not just the headline.
Likewise Compare is being built to use your own energy consumption and tariff information to compare your renewal with the alternatives on the same basis.
Because a fair comparison should answer one simple question:
Which option is actually better value for your home?
Compare two tariffs using your own energy use
Have two tariffs you want to compare? Use our Energy Tariff Comparison Calculator to enter your annual electricity and gas use, unit rates and standing charges and see the estimated 12-month cost of each.