What is the Tariff Comparison Rate (TCR)?
Comparing the multiple energy suppliers in the UK can be confusing with tariffs changing from one region to another and some suppliers charging different prices depending on consumption levels (threshold tariffs).
Tariff Comparison Rate basics
The key elements of TCRs include the following.
All suppliers must publish their Tariff Comparison Rate
This is why the national electricity and gas regulator Ofgem requires on energy suppliers to facilitate comparison through a Tariff Comparison Rate in p/kWh. The TCR is meant to enable customers or potential customers to put suppliers on an equal footing and effectively compare what they charge.
The Tariff Comparison Rate rests on UK average electricity and gas consumption
Ofgem has established that the average UK household uses 3,200 kWh of electricity and 13,500 kWh of gas each year. This changes to 4,600 kWh of electricity for households with Economy 7 meters (with day and night tariffs). All Tariff Comparison Rates are based on this consumption.
The Tariff Comparison Rate includes VAT
The Tariff Comparison Rate is not the same as the unit rate insofar as it includes 5% VAT. Multiplying the Tariff Comparison Rate by the number of energy units mentioned above yields an estimated annual cost for electricity, gas, or dual fuel.
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The Tariff Comparison Rate concerns all tariffs
Suppliers ought to publish a Tariff Comparison Rate for each of their tariff, be they variable, fixed-price, prepaid, etc. This is to enable customers to compare the type of offer they seek adequately as some suppliers only sell fixed-priced offers, whereas others only offer variable tariffs.
Working out the Tariff Comparison Rate
Suppliers work out their Tariff Comparison Rates the following way:
Electricity Tariff Comparison Rates
Standard tariffs: Standing charge x 365 days + unit rate x 3,200 kWh x 5% VAT / 3,200 kWh = TCR/kWh
Economy 7 tariffs: Standing charge x 365 days + unit rate x 3,200 kWh x 5% VAT / 3,200 kWh = TCR/kWh
Gas Tariff Comparison Rate
Standing charge x 365 days + unit rate x 13,500 kWh x 5% VAT / 13,500 kWh = TCR/kWh
Using the Tariff Comparison Rate
The Tariff Comparison Rate is fair comparison of all energy suppliers
Nothing stops you not only from comparing TCRs and estimated annual costs but from multiplying the Tariff Comparison Rate by the number kWh you already use to get a more accurate pricing comparison for your home.
The Tariff Comparison Rate is only indicative
Remember that only a detailed consumption estimate of your home will yield prices closest to those you might pay. The Tariff Comparison Rate enables customers to compare prices between suppliers but is not meant to encourage customers to use the TCR for their specific situation.
The Tariff Comparison Rate is often a national average
Except for the few suppliers who publish regional TCRs, most suppliers publish Tariff Comparison Rates based on their UK national average prices. Yet unit prices and standing charges vary significantly from one distribution area in the UK to another, making average TCRs inaccurate. Again, it is a comparison tool, not a guaranteed price.