Cut your energy bills
Wednesday, 04 February 2009 01:13
This spring gas and electricity prices are expected to fall.
Already British Gas has cut its gas prices by ten per cent. However, over 2008 energy prices rose 40 per cent and since 2004 a typical household's energy bills have more than doubled, so finding the best deals is still hard.
With the rest of the energy providers now expected to follow suit, myfiances.co.uk is now asking whether you should you hold tight for now or get the best deal while you can?
Last year the regulator Ofgem found only 17 per cent of customers are actively seeking the best deals around - but that leaves many who are sticking with uncompetitive gas and electricity firms, many of which who are still with their old local electricity board and British Gas.
For anyone who has not switched recently the first tip is to shop around now.
Dual fuel deals - getting gas and electricity from a single provider - offer better deals, but only around 8.5 million customers - or 38 per cent of households - are now on dual fuel deals.
Data from Consumer Focus, which replaced energywatch as a consumer champion for utilities, on current tariffs show a standard quarterly gas customers pays £832 a year for gas and £474 for electricity - a total of £1,306.
A dual fuel customer paying quarterly pays £1,290.
However, paying by Direct Debit brings down the cost even further to £1,119 - a savings of £187 - as consumers who opt to pay by cash or cheque have to pay more for the privilege, although some companies offer discounts for quick payment.
Greater savings still could be made when looking at the spreads between the cheapest and most expensive deals.
The highest tariff for gas and electricity separately paid by quarterly bill is £1,406, while the cheapest dual fuel direct debit bill, according to Consumer Focus, is from EDF at £1,169 - a savings of £237.
Further savings can be made from getting online tariffs and discounts for paperless billing - although an email address is needed.
Robert Hammond, energy specialist at Consumer Focus, advises: "It is always worth taking some time to investigate whether you could be on a better deal.
"One supplier has already announced a gas price cut and other suppliers may well follow suit.
"Alternatively you could investigate whether you could get a better deal from your existing supplier - either by changing your current tariff or payment method."
When to switch?
Last week British Gas cut its gas prices by ten per cent - to kick in on February 19th - claiming the reduction was possible due to lower wholesale prices.
So many consumers are left wondering whether to switch now - or wait for others to follow suit.
Will Marples, product manager at uSwitch, says: "If you are on a direct debit dual fuel tariff, you should hold off before other firms follow British Gas and make a move.
"But if you go online, you may be able to find a cheaper deal."
He adds: "If you are on a standard plan and have never switched and pay bills quarterly, then almost certainly it would make sense to switch.
"There is a hardcore of roughly ten million people who have never switched and are still with the old local electricity company and British Gas."
Energy firms are guarded about revealing ahead of time about whether they will cut their bills or not - not wanting to give the game away to a limited competition of six about where they will go.
Nick McHugh at npower says: "If we see a significant decrease in wholesale prices across the remainder of the winter and this is sustained, then we will be keen to reduce our prices.
"Wholesale prices have certainly begun to move downwards but wholesale gas is still nearly twice as expensive as it was two years ago."
A spokesperson for EDF Energy said: "During these difficult economic times, we appreciate the financial difficulties many people are experiencing.
"We are reviewing our prices and monitoring the wholesale market on a daily basis."
A spokesperson for Eon echoed this - suggesting prices may fall, but consumers could have to wait.
She said: "We hope to be able to reduce prices for customers soon, as long as wholesale electricity and gas prices continue to fall."
Npower was also sceptical of British Gas's price cut.
"The ten per cent cut simply means that British Gas standard gas prices will fall broadly into line with npower's gas prices," a spokesperson said.
"On gas prepayment, even after this reduction, BG's customers will still pay over £30/p.a. more than npower's prepayment customers."
EDF also maintained it was still better value than British Gas.
"EDF Energy remains, on average, the cheapest major energy supplier in the UK for a typical dual fuel customer* on standard tariffs, even following the British Gas price cut, based on the three most common types of payment -credit, prepayment and direct debit," the spokesman said.
Are switching services all the same?
For car insurance comparison sites the tip is to compare the comparison sites - as they offer varied deals from different insurers.
However, in the energy market comparison sites are signed up to the Consumer Focus accreditation.
This means they largely offer the same deals - all those that are on the market - and have to be independent of any gas or electricity supplier and should not let any commission they receive from suppliers influence information they provide.
"Essentially, any comparison service has to meet the same standards. There is little difference in the results they produce," said Mr Marples
"The big difference is in the user journey and how intuitive they are, but the core principles are the same."
Consumer Focus now provides a full list of sites where you can compare energy prices. Take a look, here.
Sites ask your postcode - as location does affect the cost of energy, with rural regions in Wales for example facing higher rates than in urban areas - before leading you to get information on which firms and tariffs you are on and your usage, so it can be good to have a bill handy.
Results produced provide the firms, their available tariffs, estimated savings and sometimes extra data such as the mix of energy sources and customer satisfaction.
Capped deals
Last year capped rates for gas and electricity became all the rage.
As prices were shooting up, some consumers were prepared to pay a bit more now and hold prices against rises in the future.
But if prices start to fall, they could be caught out.
"It depends when you capped," says Mr Marples.
"If it was in the middle of last year - before June - when a few companies were offering competitive fixes, you will be doing quite well.
"If you capped recently, there may be savings to make by moving."
However, those locked into long-term fixed rate deals may not find switching so easy - as their contracts may come with penalties for breaking away.
The advice is to check the contact - and weigh up the options or paying the charge will be cheaper or more expensive than any savings from switching.
Prepayment meters
Out of all energy customers, those on prepayment meters face the highest bills.
Also prepay customers are also less likely to switch firms - with many thinking it is not possible.
The higher costs come as it costs more for the energy companies to run the meters and local payment through electronic cards or keys through Paypoint.
However, critics have hit out at the lack of competition - as many people don't switch - for not making companies cut prices as much as they could.
"Consumers using prepayment meters get the roughest deal of all with average annual prices now running at £1,314 but do go as high as £1,384," a Consumer Focus spokesperson said.
"Anyone who wants to get rid of their prepay meter and have a standard meter should contact their supplier. Your supplier may require you to pay a security deposit, though."
Energy efficiency
The best way to save money in the long term is to make your home more energy efficient, for example by insulating your house or by using appliances that consume less energy.
Suppliers are obliged to help consumers with energy efficiency measures. Depending on your financial circumstances, you may qualify for either free or low cost assistance.
Mr Hammond says: "In the long term, you can save the most by making your home more energy efficient and by cutting consumption by using appliances that consume less energy."
The Energy Savings Trust estimates switching every light bulb in home for an energy saving bulb could save around £50 a year.
Meanwhile, leaving appliances, such as TVs and digiboxes, on standby wastes over £900 million worth of energy a year in the UK.
Turning a thermostat down one degree can save £60 a year on your heating bills.
Bigger savings on heating bills can be achieved through improving insulation - with about half of a home's heat lost through walls and roofs.
Grants and low cost loans exist to help cover these costs - especially for those receiving benefits or over 60.
The government's HomeFront programme offers grants of up to £2,700 for heating and insulation.
The Energy Savings Trust provides a useful search engine of grants available.
Daniel Barnes. Additional reporting John Ellul
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