- Ofgem is changing the way energy companies bill customers for their electricity
- The changes should lead to faster meter readings and lower bills from 2025
- But the bill changes only apply to homes with smart meters – and not to gas
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There is going to be a big change to the way electricity bills are calculated from next year – and experts hope this means these costs will fall for households with smart meters.
The change means that energy companies will have to draw up their customers’ bills every half hour, provided they have a smart meter installed, but this is still unknown for most households.
It only applies to their electricity consumption, and not to gas.
Energy regulator Ofgem hopes the changes will mean lower electricity prices for millions of people, estimating it will save up to £4.5 billion for consumers by 2045 by submitting more accurate bills.
Currently, the price that energy companies pay for purchasing electricity from energy suppliers varies every 30 minutes. But the price that most consumers pay does not vary that quickly and is influenced by the transmission of meter readings.
Lightbulb moment: Ofgem hopes shaking up its billing system will mean lower costs
Ofgem is introducing rules that will require energy companies to ‘settle’ consumers’ electricity bills for homes with a smart meter every half hour from June 2025.
In an energy context, ‘settlement’ means that an energy company adds up how much energy a customer has used against the amount it has cost, and not the more general meaning of paying off a bill in full.
Ofgem hopes that market-wide half-hourly charging (MHHS) reforms will lead to lower costs for consumers and a boom in ‘time of use’ energy tariffs.
These are deals where the price paid for energy varies, with cheaper rates available during off-peak times, usually at night. An example is an Economy 7 fare.
This is unusual compared to standard energy deals where the price paid does not vary over time.
A statement from Ofgem said: ‘Smart meters can record the amount of energy consumed or exported within each half hour of the day. This offers the opportunity to make the settlement process more accurate and timely and serve as a catalyst for new products and services, for example by supporting the use of electric vehicles or by using smart devices.
‘These can deliver positive outcomes for consumers through lower bills, reduced environmental impact, improved security of supply and better quality of service.’
Energy bills fell to a two-year average low of £1,635 per year from April 1, the level of the typical price cap in Ofgem, but still remain historically high.
Not every energy company will start MHHS from June 2025, as some will implement the reforms in 2026. Some energy companies also already have half-hourly billing, which is standard for time-of-use rates.
The start of the new system has been postponed three times, partly due to slow consumer adoption of smart meters. Ofgem first announced its plans for MHHS in August 2018.
Energy company network Elexon is responsible for the rollout of the MHHS scheme.
An Elexon spokesperson said: ‘Ofgem has approved a revised date of December 2026 for the transition to half-hourly billing across the market.
‘Since entering the test phases at the end of October 2023 in accordance with the published plan, the program has been on track and continues to work well with market-wide participants.’
Consumer energy champions said the move to half-hour billing was long overdue.
Abigail Ward, policy manager at Energy Saving Trust, said: ‘Better half-hourly billing will be an important part of unlocking a flexible energy system, which offsets peaks in energy consumption and uses more renewable energy across the electricity grid.
‘The program will encourage energy suppliers to offer more time-of-use tariffs, the benefits of which include reducing the cost of electric heating and electric vehicle charging at home.
‘In the broader picture, more accurate forecasting of electricity consumption means less spend on balancing the electricity grid – when power stations are switched on and off to meet changing demand.
‘The cost of balancing has increased year on year, but market-wide half-hourly billing will provide an important way to reduce these costs, which in turn should help reduce people’s energy bills.’