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Is now the time to switch to a fixed-price energy tariff?
Wednesday, 02 Jul 2008 12:22
It is difficult not to notice that the cost of living has been escalating lately… Mortgage payments, fuel prices and the cost of food all seem to be throwing heavier punches than ever before – and the price of our household energy bills is also joining in the pummelling. The wholesale cost of energy has almost doubled in the last year*, and bodies such as energywatch, OFGEM and British Gas are in agreement that this is the driving force behind recent and future price increases. So is now the right time for consumers to ensure that they’re on a fixed-price tariff, and hence shielded from future price fluctuations?
What if you’ve never switched?
By switching to the best deal in the marketplace, the average customer who has never switched energy suppliers or tariffs can make a saving of £226**.
The best capped deal is currently offered by EON, which is their Price Protection 2009 tariff – where prices can be fixed until the October 2009. However, this offer is still almost 14% more costly than the cheapest alternative tariff**.
And just because you have always been powered by the same energy supplier, this doesn’t mean that they are going to reward your past loyalty. On the contrary, the best deals tend to be offered to attract new customers – so it pays not to think of a long-standing supplier as a member of the family or part of the furniture. So what’s stopping you shopping around?
Is it worthwhile if you’ve switched before?
Market rates have been particularly volatile over the course of the last twelve months. It is worth checking for the best deal in your area because there are still a large selection of tariffs available – around 14,000 at the time of writing – and you may find that you’ve been lumbered with a tariff which is causing you to pay over the odds. It cannot hurt to check out comparison sites to see if you are still getting a deal you’re happy with. Be sure to go to a site which has subscribed to the energywatch Confidence Code – a voluntary code of conduct which ensures that sites are independent from gas and electricity suppliers, show all available tariffs from all licensed suppliers, and show accurate prices with update dates clearly stated (for more information see: http://www.energywatch.org.uk/uploads/confidence_code.pdf). If you go to a site such as Confused.com which has signed up to the Confidence Code, you will have peace of mind that you are getting the best available deals.
To cap or not to cap?
So should we be bracing ourselves with a fixed-price tariff such as that offered by EON? Although wholesale costs are reported to have doubled in the last year, and this is still an influential factor affecting the retail cost to consumers, it is worth bearing in mind that the best capped deal currently available is still a good 14% more expensive than the best uncapped tariff – which is a significant amount. That said, average price hikes of between 10% and 15% are still common, and as such a capped deal is worth considering for those who wish for some stability in controlling their outgoings.
But according to Gareth Kloet of Confused.com, “The forecast may seem a little gloomy, but it’s not all bad news. I think it’s always possible to get a better deal than even the lowest capped tariff, and those who regularly shop around may find that they stay on top of the game by paying beneath the odds.
“Around half of the households in this country have never switched supplier, which is ridiculous. In some cases, they can be paying an extra 20% premium on their fuel through their inertia***. Some can even make that kind of saving straight away by contacting their energy company, and switching to a better value tariff – without even having to change their supplier!”
*From Centrica Interim Management Statement, 12/5/08: “On average the month-ahead prices for gas and power were 92% and 100% respectively above those for the same period of the previous year. Against this backdrop all major energy suppliers increased residential energy tariffs during the first quarter of the year.”
**See attached table. Figures correct on 22/5/08.
***Customers supplied by British Gas for their gas and their local electricity supplier will pay £1,092.57 per annum on average; whereas the average customer with the British Gas Click Energy 5 tariff on dual fuel will pay £866.15 per annum on average.