Introduction to Electricity Billing Changes

A significant shift is on the horizon for how electricity bills are calculated, set to take effect next year. Experts anticipate that this change will lead to reduced costs for households equipped with smart meters.

Benefits for Users of Electric Bills

Starting next year, energy firms will be required to assess customers’ electricity bills every half-hour, provided they have a smart meter installed. This alteration, however, remains largely unknown to most households and solely applies to electricity usage, leaving gas bills unaffected.

Regulatory Measures by Ofgem for Electricity Billing

The regulatory body, Ofgem, anticipates that these changes will translate into lower electricity prices for millions of households. It estimates potential savings of up to £4.5 billion for consumers by 2045, thanks to the introduction of more accurate billing methods.

Transition to Half-Hourly Settlement of Electricity Bills

Presently, energy firms encounter varying costs for purchasing power from energy providers every 30 minutes. However, the prices paid by most consumers do not fluctuate as rapidly and are influenced by manual meter readings.

Promoting Time-of-Use Tariffs to Reduce Electricity Bills

To address this, Ofgem is implementing rules mandating energy firms to ‘settle’ consumer electricity bills for homes with smart meters every half-hour starting from June 2025.

In this context, ‘settle’ refers to energy firms reconciling the amount of energy consumed by a customer with the associated costs, rather than merely paying off a bill in full.

Challenges and Implementation Delays in Changing Electricity Bills

Ofgem’s market-wide half-hourly settlement (MHHS) reforms aim to not only reduce costs for consumers but also promote the adoption of ‘time of use’ energy tariffs. These tariffs offer varying energy prices, with cheaper rates during off-peak periods, such as overnight, exemplified by Economy 7 tariffs.

Role of Elexon in the Transition of Electricity Billing

Despite the potential benefits, not all energy firms will transition to MHHS by June 2025, with some extending the implementation into 2026. Additionally, some energy firms already employ half-hourly settlement, particularly for time-of-use tariffs.

Consumer Advocacy and Savings on Electricity Bills

The delayed implementation of the new system, postponed thrice, partly stems from slow consumer uptake of smart meters. Ofgem initially outlined its MHHS plans in August 2018.

Elexon, the energy firm network, oversees the rollout of the MHHS scheme. According to an Elexon spokesperson, Ofgem has approved a revised implementation date of December 2026 for the full market transition to half-hourly settlement.

Consumer energy advocates have welcomed the move to half-hourly billing as long overdue. Abigail Ward, policy manager at Energy Saving Trust, highlights that improved half-hourly settlement will play a pivotal role in fostering a flexible energy system, promoting the adoption of time-of-use tariffs, and reducing grid balancing costs.

In essence, the introduction of market-wide half-hourly settlement signifies a significant step towards more accurate and cost-effective energy billing, benefitting consumers and facilitating the transition towards a sustainable energy future.