A tariff may promise a £200 annual saving, but that doesn't necessarily mean your household will be £200 better off. Here's what an energy saving figure really tells you — and what to check before switching.
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Energy Bills
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8 min read
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Likewise Compare
A £200 annual saving sounds straightforward.
If your current energy costs £1,800 a year and another tariff costs £1,600, switching apparently leaves you £200 better off.
But there is an important question hidden behind that figure:
£200 compared with what?
An energy saving is not a price in its own right. It is the difference between two estimates.
And if either estimate doesn't reflect what your household will actually pay over the period you're interested in, the eventual saving may be very different from the headline figure.
That's why it is worth understanding how an energy saving is calculated before deciding whether to switch.
A saving is only as good as the comparison behind it
Consider a simple example.
You are shown:
Current tariff estimated cost: £1,800 a year
New tariff estimated cost: £1,600 a year
The advertised saving is therefore:
£1,800 − £1,600 = £200
The arithmetic is perfectly correct.
But that alone doesn't tell us whether you will actually save £200.
We need to know how the £1,800 and £1,600 figures were calculated.
A meaningful comparison should use the same household consumption and consistent assumptions for both tariffs.
Ofgem's approach to Estimated Annual Cost reflects this principle: where historic consumption is available, it should be used, and relevant assumptions should be applied consistently when different tariffs are compared.
Your consumption matters
Energy tariffs generally contain two important charges:
Unit rate — what you pay for each kilowatt hour (kWh) of energy you use.
Standing charge — the daily charge you pay regardless of how much energy you use.
Your estimated annual cost therefore depends heavily on your annual energy consumption.
Suppose a household uses:
2,500 kWh of electricity a year
9,000 kWh of gas a year
A fair tariff comparison should apply those same consumption figures to both options.
If instead a headline saving is based on typical consumption that differs significantly from yours, the saving may not describe your household particularly well.
Ofgem itself uses Typical Domestic Consumption Values to illustrate what a typical household might use, but describes these values as a way of helping communicate prices when a customer's actual usage isn't known.
Your household isn't necessarily typical.
£1,723 isn't everybody's energy bill
The same issue applies to the energy price cap.
For October to December 2026, Ofgem's headline price-cap figure for a typical dual-fuel household paying by Direct Debit is £1,723 a year if those rates were sustained for a year.
That does not mean every household on the price cap will pay £1,723.
The cap limits the rates suppliers can charge customers on default tariffs. The actual amount a household pays depends on factors including energy consumption, location and meter type.
So imagine a fixed tariff is described as costing £1,523.
Simply calculating:
£1,723 − £1,523 = £200
doesn't necessarily establish that your household will save £200.
The first figure represents a typical-consumption illustration.
What matters to you is what the two tariffs would cost using your consumption.
The comparison period matters too
There is another problem with comparing annualised figures.
The energy price cap changes every three months.
The £1,723 cap announced for October 2026 applies to rates between 1 October and 31 December 2026. The £1,723 headline figure expresses what a typical household would pay over a year if those rates continued for a full year.
But they are not guaranteed to continue for a full year.
The next cap period begins in January.
And the one after that begins in April.
So comparing a 12-month fixed tariff against an annualised figure derived from a three-month price-cap period cannot tell you precisely what the fixed tariff will save over the entire 12 months.
Future capped rates could rise.
They could fall.
Until those future rates are known, part of any 12-month comparison against a variable tariff necessarily involves uncertainty.
A £200 saving can therefore change
Imagine a 12-month fixed tariff costs an estimated:
£1,550 a year
And today's variable tariff rates, annualised, produce:
£1,750 a year
That gives an apparent saving of:
£200
Now imagine capped rates fall during the fixed-tariff period.
The variable tariff might then cost less than the original £1,750 estimate.
Your eventual saving from fixing could therefore be less than £200.
If future capped rates instead rise, the fixed tariff could turn out to save more than £200.
The original £200 wasn't necessarily a bad calculation.
It was a calculation based on information and assumptions available at a particular point in time.
That's an important distinction.
Unit rates can matter more than the headline annual figure
Instead of looking only at:
“Save £200”
look underneath the estimate.
Compare:
Electricity unit rate
Electricity standing charge
Gas unit rate
Gas standing charge
Then apply your own consumption.
For example, two tariffs could both be advertised at approximately £1,600 for a typical household while having different combinations of unit rates and standing charges.
A household using relatively little energy may be more affected by the standing charge.
A household using much more energy may find differences in unit rates increasingly important.
That's why the tariff structure matters, not just the headline annual number.
Don't use your Direct Debit as your current annual cost
There is another easy way to produce a misleading comparison unintentionally.
Suppose you currently pay:
£150 a month by Direct Debit
Multiplying that by 12 gives:
£1,800
A new tariff is estimated at:
£1,600
So it appears that you will save £200.
But your Direct Debit isn't necessarily the same thing as the cost of the energy you're consuming.
Your payment may be building up account credit, paying down a debit balance or reflecting your supplier's estimate of future consumption.
So:
£150 × 12 = £1,800
doesn't automatically establish that your current tariff costs £1,800 a year.
For a stronger comparison, use your actual energy consumption and tariff rates.
Exit fees can reduce the value of switching again
Suppose you move to a tariff because it appears to save £200.
Six months later, much cheaper tariffs become available.
You would like to switch again — but your fixed tariff has an exit fee.
If the fee is £75 per fuel, leaving a dual-fuel tariff could cost £150, depending on the contract terms.
That doesn't mean the original tariff was a poor choice.
But it does mean that the headline £200 shouldn't be considered without looking at the conditions attached to the tariff.
Ofgem advises consumers considering fixed tariffs to take their circumstances and possible exit fees into account.
Ofgem's consumer research also found that while annual savings were the most important factor in tariff choice, exit fees and customer service affected people's decisions too.
So what should a saving figure tell you?
A useful energy comparison shouldn't simply say:
You could save £200.
It should make it possible to understand:
what you're being compared against
what energy consumption has been used
which unit rates and standing charges have been applied
what period is being compared
whether future price changes have been assumed
whether the tariff is fixed or variable
whether exit fees apply
whether the estimate uses your consumption or a typical household
Then the £200 becomes something much more useful:
an explainable estimate rather than just a headline number.
£200 estimated saving is different from £200 guaranteed saving
This distinction is perhaps the most important one.
If a comparison says that one tariff is estimated to cost £1,600 and another £1,800 using the same consumption and assumptions, then the difference between them is indeed £200.
But that doesn't necessarily mean:
“You will have £200 more in your bank account at the end of the year.”
Your actual consumption could change.
Future variable rates could change.
Your circumstances could change.
You could leave a fixed tariff early.
The £200 is therefore better understood as an estimated difference between two options under stated assumptions.
That isn't a reason to ignore comparison figures.
It's a reason to make them transparent.
Compare first. Then decide.
A large saving can make switching worthwhile.
A small saving may not.
And sometimes the comparison may show that staying with your existing supplier is actually cheaper.
The important thing is being able to see how the result was reached.
At Likewise Compare, that's the principle we're building around.
Use the information from your bill or renewal offer to compare available options using your own energy consumption.
See the estimated cost.
See the difference.
And understand what sits behind the saving.
Because the biggest saving on the screen isn't necessarily the saving you'll actually make.
Want to understand what your energy options could really cost?
Likewise Compare is being built to compare energy tariffs using your own consumption and tariff information — with the aim of showing you the calculation behind the result, not simply the biggest headline saving.