Two Lines, One Meter: The Break-Even Point Hiding in Your Energy Tariff
Photo: Skyhead, CC BY-SA 4.0, via Wikimedia Commons
The email says it has the cheapest unit rate in your postcode. That may be true. It may also be the least useful number on the page. Your energy bill is not one price; it is two prices bolted together: a standing charge you pay just for being connected, and a unit rate you pay for every kilowatt-hour you actually use. One is a flat fee. The other is a slope. Put them together and you get a straight line — and once you can see the line, you can compare tariffs properly.
The bill as a line, not a lump
Let N be the number of days in the period you are looking at. Let U be your usage in kilowatt-hours. If the standing charge is s pounds per day and the unit rate is u pounds per kWh, the bill is:
C = sN + uU
That is the same shape as y = mx + c, just with less romantic letters. The standing charge is the intercept: it is there before you boil a single kettle. The unit rate is the gradient: it decides how quickly the total climbs as you use more.
This matters because two tariffs can look almost identical on a comparison site and behave very differently in your flat. A deal with a low unit rate and a high standing charge is not automatically the cheap one. It is only cheap if you use enough units to make the lower rate pay back the bigger fixed fee.
Two tariffs, one cold flat
Take a rented one-bed flat in a northern city. Suppose it has electric heating and an electric shower, so winter usage is heavier than the national average. We will compare two made-up tariffs over a 90-day winter quarter.
| Tariff | Standing charge | Unit rate |
|---|---|---|
| A | 55p per day | 24p per kWh |
| B | 75p per day | 21p per kWh |
Tariff B has the cheaper unit rate. That is the number the advert would put in bold. But over 90 days, the equations are:
C_A = 0.55 × 90 + 0.24U = 49.50 + 0.24U
C_B = 0.75 × 90 + 0.21U = 67.50 + 0.21U
Set them equal to find the crossover:
49.50 + 0.24U = 67.50 + 0.21U
0.03U = 18
U = 600 kWh
So in this 90-day window, Tariff B only wins once the flat uses more than 600 kWh. At 400 kWh, Tariff A costs £145.50 and Tariff B costs £151.50. At 900 kWh, the order flips: Tariff A costs £265.50 and Tariff B costs £256.50. Same two tariffs, same city, opposite answers — because the usage changed.
That is the whole trick. The cheapest-looking tariff is not a fact about the tariff alone. It is a fact about the tariff and your meter.
The annual version of the same question
Quarterly figures are useful because winter is when the decision bites, but annual usage gives you a cleaner comparison. Over 365 days, the fixed parts are £200.75 for Tariff A and £273.75 for Tariff B. The difference is £73. The unit-rate gap is 3p per kWh, so the annual break-even is:
73 ÷ 0.03 = 2,433 kWh
If the flat uses 2,100 kWh across the year, Tariff A costs £704.75 and Tariff B costs £714.75. The lower unit rate loses by £10. If the flat uses 3,000 kWh, Tariff A costs £920.75 and Tariff B costs £903.75, so Tariff B wins by £17.
Notice what has happened to the marketing language. Tariff B can still be described as having a cheaper unit rate, and it can still be the wrong choice. Nothing false has been said. The graph has simply been left out.
Where city living bends the line
Your street is full of different usage shapes. A gas-heated terrace might use relatively little electricity, so a low standing charge matters more than a fancy unit rate. A converted flat with electric hot water and a heat pump might run up the kilowatt-hours all winter, making the low unit rate worth the higher fixed fee. A flat that sits empty for weeks still pays the standing charge — there is no holiday from the intercept.
This is why averaged advice is so slippery. Ofgem-style price cap figures and comparison-site estimates rely on a typical household, but typical is a statistical invention. Your actual usage is the variable in the equation. If you work from home, have a baby, run an electric heater in a draughty bay window or barely turn the heating on, you are not typical. You are a point on a line.
There is one more wrinkle: many modern tariffs are not a single clean line. Economy 7 and other time-of-use deals split the day into different unit rates, so you get a pair of lines or a piecewise graph. But the same logic applies. Find the fixed part, find the rate that applies to each chunk of usage, and compare the totals over the period you care about.
Run it before you switch
You do not need a spreadsheet, though a spreadsheet helps. Take a recent bill. Note the standing charge in pence per day, the unit rate in pence per kWh, and the kWh used over the period. Write each tariff as C = fixed cost + rate × usage. Solve for the usage where the two totals are equal. Then ask the only question that matters: is your real usage above or below that number?
If Tariff B has the higher standing charge and the lower unit rate, the crossover is:
U = (difference in fixed costs) ÷ (difference in unit rates)
Keep the units consistent — pence with pence, pounds with pounds — and the answer will behave. Then check it against a winter quarter and a summer quarter, because a flat that wins in July may lose in January.
The unit rate is a headline. The standing charge is the small print. The line is the story, and it is yours to draw.
