Economy 7 describes a type of tariff available in the UK. They differ from standard tariffs because economy 7 customers pay a different rate for energy at night than they do through the day. These tariffs are available across a range of energy suppliers. They all offer a 7 hour (hence economy ‘7’) overnight period of low energy costs.
In order to take advantage of an economy 7 tariff, you must have an economy 7 meter installed. These are different to the standard meter most households have installed. They give two readouts, one for daytime energy use and one for overnight.
Overnight charges are referred to as ‘off-peak’ energy charges. They will be significantly cheaper than the rate paid during the on-peak hours. A typical example of off-peak hours is from midnight to 7am. This varies between suppliers but will always add up to 7 hours of off-peak energy.
The economy 7 meter is provided by most energy suppliers free of charge.
Will I get cheaper energy using economy 7?
Whether or not you will be better off with economy 7 depends on your energy use habits. The following points may not apply to everyone but could indicate you will save money using economy 7:
Most of your electricity usage is overnight. The typical marker is if you use 40% or more of your electricity during the off-peak hours.
If your home uses an electric storage heater or a hot water tank which is heated electrically. When possible, using off-peak power to heat your water or storage heater can be more economical. The energy stored from cheap energy overnight can then be used throughout the day.
If you have high energy usage appliances that can be used overnight. Work out if your high demand appliances such as dishwashers, driers, washing machines etc, can be used overnight. If the answer is yes, low overnight charges could cut your electricity bills significantly.
Circumstances to avoid economy 7
You may never have heard of this type of tariff. That is because they are certainly not for everyone. The on-peak charges are often double the off-peak costs for your energy. This can make your energy bills staggeringly more expensive if you get it wrong. Here are some reasons why you shouldn’t consider economy 7:
You don’t have a storage heater or water tank. If you are using electricity to heat your home without a storage heater or water tank, economy 7 is a bad idea. Any hot water or heating requirements through the day will incur the higher on-peak rates.
Although not always the case, a gas heated home will tend to benefit much less from economy 7. This is dependent on how you tend to use electricity. If most of your usage is overnight, economy 7 may still provide savings with gas heating.
How does it work?
As previously mentioned, you will need an economy 7 meter. This will have two readings split between your day and night time usage. Different economy 7 suppliers use varying on and off-peak timings. Making sure that you are fully aware of those timings is key to getting the most out of this tariff. It will be a 7-hour period falling somewhere between the hours of 10pm and 8am.
One point of note here- Some meters will maintain Greenwich Mean Time throughout the year. This means that when the clocks go forward to British Summer Time, you will need to adjust when you use appliances. For this six-month period, you will be out of step by an hour. In most instances this won’t cause any problems but it is worth being aware of.
At the start of your contract you will have two different rates for your energy. One for on peak and one for off peak as well as your daily standard charge. The off-peak charge will be significantly lower, typically around 8p per KWh. Your on-peak charge is likely to be double or more than your off-peak. Because of this, managing when you use your energy is critical to making sure you get the best use of this tariff.
Using a higher proportion of your energy at night will increase the savings that you make over the year. Using around 40% of your energy at night typically leads to savings around the £20 per year mark. This will increase with the more off-peak energy usage you can manage.