Utility bills have become a hot topic of conversation in the UK in the last few years. With prices skyrocketing, understanding your bills is more crucial than ever. Bills can be an overwhelming topic, and many people simply pay them without questioning how costs are calculated, what unit rates mean, or how they can cut down on their energy usage.
Grasping the details of your energy bill can help you make smarter financial decisions, whether it’s switching to a better tariff, using a smart meter, or improving your home’s energy efficiency.
This Remitly guide breaks down the key components of utility bills, explains standing charges, energy tariffs, and network costs, plus provides tips on reducing your electricity costs.
Read to the end and you’ll have the confidence to analyse your bills and optimise your energy use to the max.
Understanding Utility Costs in the UK
Utility bills: an overview
A typical household pays for several essential utilities. Gas and electricity are the most significant here, often making up over 60% of total household utility expenses.
The cost of these services is influenced by wholesale costs, government regulations (Ofgem price cap), and the rates set by energy suppliers.
These are the four key bills most people will have to pay on a monthly basis in the UK:
- Electricity bill. Charges for power consumption from the National Grid.
- Gas bill. Used for things like central heating and cooking.
- Water charges. Either meter-based consumption or a fixed rate.
- Broadband and phone bills. Monthly charges for internet and phone services.
The importance of understanding your bills
Think time spent analysing your energy bill is time wasted? Think again. Prices are rising all the time, but there are always steps you can take to pay less—and that starts with a strong understanding of what you’re being charged.
- Avoid overpaying: Many customers unknowingly pay more than they should due to estimated meter readings, high-standing charges, or unnecessarily expensive tariffs.
- Identify errors: Billing mistakes, incorrect MPAN/MPRN numbers, and miscalculated charges can lead to higher bills.
- Optimise energy usage: By understanding your electricity meter readings, you can track and reduce your energy use.
- Compare suppliers: Knowing how costs are calculated allows you to find cheaper energy suppliers and switch to a better tariff.
A Breakdown of UK Utility Bills
So, with that in mind, here’s the stuff that really matters:
What your electricity bill looks like
Your electric bill includes several key elements:
- Energy consumption (kWh): The amount of electricity you’ve used, calculated in kilowatt-hours.
- Unit rates:The cost per kilowatt hour (kWh).
- Standing charges: Fixed daily fees to cover network costs.
- Taxes and levies: VAT and charges for green energy programs.
How an electricity bill is calculated
Let’s assume:
- You use 350 kWh in a month.
- Your unit rate is 30p per kWh.
- Your standing charge is 40p per day.
- Your monthly electricity bill would be: (350 kWh × £0.30) + (30 days × £0.40) = £105 + £12 = £117
Gas bills: an overview
Now let’s look at gas – your gas bill is pretty similar, but here are some key differences:
- It’s measured in cubic meters (m³) or cubic feet (ft³), then converted to kWh.
- Unit rates for gas are typically lower than for electricity, but overall gas usage is higher due to heating.
- Includes an MPRN (Meter Point Reference Number), a unique ID for your gas meter.
Because gas is measured in volume, but billed in kWh, a conversion is required—it sounds confusing, but this formula will give you a close-enough figure:
Cubic meters used x 11.2 = kWh
So, if you used 100 cubic meters of gas in a month:
100 x 11.2 = 1,120kWh
Assuming your unit rate is 10p per kWh, your variable gas costs would be £112.
Water charges explained
Water bills depend on:
- Metered usage: You pay for what you use—these work much like the electric and gas examples above and will be measured by cubic metre, plus a standard daily rate.
- Unmetered rates: You’ll pay a fixed annual charge (usually on a monthly basis) based on your property value.
Average water bills in the UK are around £37 per month for a standard household.
Broadband and other utilities
Broadband and phone bills are set by the different network providers and can range from as little as £20 to well over £70 per month.
Costs depend on your data usage, contract length, and internet speed.
What Affects the Cost of your Energy Bill?
Several factors can impact how much you pay for gas and electricity. The most significant is the amount of energy you’re consuming in your home—if you’ve always got the heating on or you’re mining bitcoin, for instance, your bills will be higher.
A key aspect of your electricity and gas usage is energy efficiency.
This is affected by things like:
- Home insulation. Poor insulation leads to higher heating costs, while good insulation will lead to lower consumption.
- Appliances. Older models consume more power.
- Lifestyle habits. Long showers, inefficient cooking, and excessive heating all increase costs.
Payment methods
Something that people are often unaware of, is that how you pay your bills can affect the cost:
- There are often discounts for setting up a Direct Debit (a standard monthly charge to your account).
- Prepayment meters usually come with higher unit rates and standing charges.
Household size
It stands to reason that a larger home full of people will consume higher amounts of energy than a small flat used by a single person. The larger the space, or the family, the greater impact efficiency measures will have on your bills!
Regional variation
Utility prices differ by region due to:
- Network costs: Maintaining power lines and gas pipelines.
- Supplier competition: More suppliers mean lower rates.
These variations can have a changing impact on bills over time, but as a rule London and the southern regions tend to have higher standing charges and unit rates than other parts of the country.
How much is an average utility bill in the United Kingdom?
This question is a little like asking, “How long is a piece of string?” There are just so many factors that influence what you’ll pay.
To give you some idea though, here is a breakdown of average prices depending on the size of your household:
| Household Size | Electricity Bill | Gas Bill | Total Energy Costs |
| Single Person | £50–£70/month | £40–£60/month | £90–£130/month |
| Couple | £80–£110/month | £60–£90/month | £140–£200/month |
| Family of Four | £130–£180/month | £100–£140/month | £230–£320/month |
Practical Tips for Reducing Your Gas and Electricity Bills
- Use a smart meter: These little gadgets give you a simple display to track real-time usage so you understand how much you’re consuming on a daily basis—and how much you’re paying for it. Unfortunately, just having one at home won’t save you any money, but it might help you change your habits.
- Insulate your home: This can often be cheaper than you think and have a real, long-term impact on your heating consumption.
- Unplug your appliances: Save on standby power consumption.
Understanding kWh and using it to your advantage
As we explained above, a kWh (kilowatt hour) is a measurement of energy use. It’s the amount of energy delivered by one kilowatt of power for one hour—simply put, how much energy you’ve consumed.
Take this example: a 2,000W (2 kW) electric heater used for 5 hours:
2kW x 5 hours= 10kWh.
If the unit rate on your electricity bill is 30p per kWh, then running this electric heater for 5 hours would cost you 300p, or £3.00.
Switch providers to get better rates
Changing your energy supplier at the right time can help you save significant cash in the long-term. Some comparison sites claim an average household stands to save hundreds of pounds per year by choosing the right deal.
Choose the right tariff
Fixed Tariff
On a fixed tariff, unit rates and standing charges remain the same for the contract period (usually 12–24 months). This gives you peace of mind as it protects against price increases, even if wholesale costs go up.
Variable Tariff
As the name suggests, unit rates can change based on market fluctuations and Ofgem’s price cap. There are generally no exit fees, meaning more flexibility to switch providers, but your bills are less predictable and you could end up paying more if prices rise.
Remember: If energy prices are expected to rise, a fixed tariff can provide stability. If prices may drop, a variable tariff could be more cost-effective.
Understanding your gas and electricity bills is the first step to ensuring you’re not overpaying. Being aware of what you pay for will help manage expenses effectively, and take steps to optimise your bills.
Whether that means switching energy suppliers, monitoring and reducing your energy use, or improving your home insulation, small changes can make a big difference in the long run.
Always check your meter readings, explore renewable energy options, and compare energy tariffs to ensure you get the best deal. And crucially, don’t forget to compare suppliers—online comparison tools like Uswitch and Compare the Market can help you find the best deals.
FAQs
What is the average energy bill in the UK?
The average electricity bill in the UK in January 2025 is about £892 per year (including annual standing charge). The average gas bill in the UK in January 2025 is about £845 per year (including annual standing charge). This makes for a combined total of £1737 per year—but remember, the size of your household and other factors will have an impact on your bills.
How do utility bills work?
Your energy bills are essentially made up of the meter readings taken (or sometimes estimated), plus the unit rates and standing charges of your tariffs.
What should I check on my energy bill?
There are three important elements to check on your bills:
- Correct meter readings.
- Tariff details.
- Hidden fees and exit charges.