Lowering bills, cutting carbon
27 Sep 2022
Economy 7 tariffs are a type of ‘time of use’ tariff. That means you’re charged different amounts for electricity you use during the day (your ‘peak rate’) and electricity you use at night (your ‘off-peak’ rate). They’re designed for homes that use night time electricity to power storage heaters, or to charge an electric vehicle, but you need to use a certain proportion of your electricity at night for them to make sense. So, is Economy 7 right for you, and if so, which tariff?
Well, use our calculator below to find out…
The Energy Price Guarantee takes effect from 1 October 2022 and is designed to give households long-term protection from record energy prices. It sets a limit on the unit rates that suppliers can charge most customers, but the Energy Price Guarantee works a little differently for Economy 7 customers.
The government has made some assumptions about what constitutes a “typical Economy 7 dwelling” in order to calculate the Energy Price Guarantee for residences on Economy 7 tariffs. That translates to: 4,200 kilowatt hours of electricity utilised annually, with 42% of it used at night and 58% of it used during the day.
The prices your supplier can charge for peak rate and off-peak electricity are constrained by the Energy Price Guarantee by a “weighted average” figure. This is computed by placing a cap on the total amount that a “average home” will pay for peak and off-peak power, and then dividing that amount by the total number of units used over the year (4,200 kWh).
Therefore, if the total electricity expenditure for a typical Economy 7 was £1,310 a year, then the “weighted average” unit price would be £1,310 divided by 4,200 kWh, or 31.2p per kWh.
Here’s why that’s significant: The peak and off-peak rates that different suppliers use to calculate the weighted average are set at the discretion of the suppliers. Depending on the balance of electricity you use during the day versus at night, different peak and off-peak rate combinations will be better or worse for you. You will profit from a tariff with a significant differential between the night and day prices if you use more off-peak energy than the “average home” (i.e., more than 42% of your electricity is used off-peak). A tariff with a lower differential between the night and day rates will be advantageous if you consume less off-peak energy than the “average” residence. Use our calculator above to compare two different Economy 7 tariffs to find out which will work better for you.
Read our guide.