Tariff Comparison Rate

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One criticism that has long been aimed at energy companies is that tariffs are far too complicated, there are too many of them and as a result comparisons between tariffs becomes extremely difficult. When Ofgem, the independent regulator for the energy industry, took a look into the domestic energy market in their retail market review they came to a similar conclusion. As a result, Ofgem have proposed a new type of rate to be applied to all gas and electricity tariffs called a tariff comparison rate (TCR).

What is a tariff comparison rate?

Ofgem’s aim here is to make energy tariffs simpler and clearer for customers and the TCR will allow a more easy comparison between different tariffs across different providers. In this respect it operates in much the same way the APR% rate does for financial products such as loans and credit cards.

The TCR will be a single figure that takes into account any standing charges, unit rates and discounts that go into providing a tariff’s overall cost. Customers can then quickly take this TCR, compare it against another tariff - either from the same supplier or a different supplier - and tell instantly which one is cheaper.

Tariff comparison rates will then be required to be printed on all communication between energy suppliers and their customers.

When will tariff comparison rates come into effect?

Tariff comparison rates are in effect from 31st March 2014.

How to calculate the tariff comparison rate

  • Multiply unit rate by Ofgem's average consumption figures – 3,100 kWh for electricity and 12,500 kWh for gas
  • Add a year's standing charge i.e. Standing Charge x 365 days
  • Subtract any discounts applicable
  • Add VAT at the current rate
  • Divide this figure by 3,100 (electric) or 12,500 (gas) to give us the tariff comparison rate in pence per kWh

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