How do you cut fuel bills before the winter chill sets in? Go online

As competition heats up in the home energy market, finding the best deals can be confusing.

With winter just around the corner millions of Britons will be turning their attention to their energy bills and how to ensure that keeping out the chill doesn't mean taking a wrecking ball to their finances.

Recent movements in the energy market have seen several companies offer cheaper tariffs just in time for the cold weather, but while these changes will hit the headlines, what do they really mean for consumers?

Several of the biggest energy companies have announced new tariffs hoping to entice the tens of thousands of households that have recently come off a fixed tariff. The cheapest offer is from a small supplier called First Utility, with an average bill of £958.83 per year. Another new entrant to the market offering competitive prices is Ova Energy, with an average annual bill of £978.67 on its New Energy tariff.

"We've seen movement from most of the online deals as they battle for position to be the cheapest deal on offer," says Scott Byrom, the utilities manager at price comparison website Moneysupermarket.com. "It is encouraging to see new entrants in the market aggressively lead on price."

These smaller companies are able to offer such prices by taking advantage of recent falls in wholesale prices, while the big six suppliers – British Gas, EDF Energy, E.On, npower, Scottish Power, and Scottish and Southern – are still using energy bought months ago, when industry prices were much higher. However, Mr Byrom says that this energy is coming to an end, so the smaller firms' position at the top of the results may be short-lived.

Despite the online price war, anyone expecting spectacular price drops will be disappointed as most of the big six have indicated that they have no plans to pass on the dramatic falls in wholesale energy prices since last year. This has understandably outraged consumers, but firms blame it in part on the volatile nature of wholesale prices and the potential for costs to increase next spring.

Many people switched to a fixed-rate tariff in summer 2008 and protected themselves from the second round of price hikes, which came in the autumn. Many will now be at the end of their fixed deal and are advised to act quickly to avoid being automatically moved to a more expensive standard tariff. These tariffs are typically the least competitive tariff offered by each company, with the customer paying by cash or cheque.

"I'd encourage anyone on a fixed rate deal that has come to an end to switch again, as their default rates are poor in comparison to the best alternatives online," says Gareth Kloet, the head of utilities at price-comparison site confused.com.

The difference between standard and online energy tariffs can be substantial, which the energy firms say reflects the extra processing costs of bills. The average standard tariff with Scottish Power, for example, costs £1,361.95, in stark contrast to its average online tariff at only £972.38, a difference of almost £400.

All the biggest energy suppliers offer internet-based tariffs, allowing customers to manage their accounts online and enter their own meter readings, thus eliminating the risk of over or underpaying on an estimated bill. There are no paper bills with an online tariff, and customers can either pay by direct debit or log into their accounts and pay their bills each time they receive an email reminding them that a payment is due. "With online tariffs, there are no worries about estimated meter readings. You're getting 100 per cent accurate bills and you're in control," says Mr Byrom.

While switching is generally touted as the key to reducing your energy bills, many consumers are baffled by the sheer volume of options. Consumer groups have criticised energy firms and called for more transparency, saying that consumers are confused by the range of products on offer and the complexity of their bills.

"It's difficult for consumers," says Fiona Cochrane, a senior policy advisor at consumer group Which?. "There are over 4,000 tariffs to choose from, so how can you expect someone to make an informed decision?"

Another aspect of switching that makes life difficult for consumers is that best-buy tables rarely tell the full story. These are based on average energy consumption, so if you're a heavy or light user they will not paint an accurate picture. Deciding on the type of tariff can also be tricky. Most people get their gas and electricity from separate suppliers, known as single-fuel tariffs, but switching to a duel-fuel tariff and having the same supplier for both gas and electricity is usually cheaper. It may also be helpful to have only one bill and one company to deal with for all your energy needs. However, where you live will play a part, so while a duel-fuel tariff with a single supplier may be the cheapest choice in one area, in another, it may be prudent to have separate providers. The advice is always to shop around carefully, comparing prices based on your actual location and usage.

Typically, capped or fixed tariffs, which involve being fixed at a set rate for a certain period of time, are not the most competitive tariff type because companies want to safeguard against wholesale price increases. If prices rise, those with capped tariffs will benefit. But for those who need to budget carefully, a fixed rate could be the best option. However, remember that while a fixed tariff offers some security, some of these deals have substantial exit fees and require a 12-month commitment.

"If you're on a tight budget, you may want to opt for the best fixed-rate deals around, purely to give yourself some security over potentially rising energy prices as winter takes hold. People use much more energy in the winter, so don't put things off," says Mr Kloet.

Some suppliers have introduced "market-tracking" tariffs, which work in a similar way to tracker mortgages that follow the base rate. A market-tracker tariff follows the movement in the wholesale market, with a rate review every three months. A market tracker is only a good idea if you're willing to risk price increases in the wholesale market in exchange for any wholesale reductions.

Usage habits should also play a key part in your decision. Economy 7 tariffs have two pricing structures; a cheaper one for the night, normally between 1am and 8am, and a considerably more expensive one for the day, although times can vary depending on suppliers and regions. This may work out cheaper if you use at least half of your energy at night and have storage heaters.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
Voices
Stephanie first after her public appearance as a woman at Rad Fest 2014
voices

Arts and Entertainment
Banksy's 'The Girl with the Pierced Eardrum' in Bristol
art'Girl with the Pierced Eardrum' followed hoax reports artist had been arrested and unveiled
Voices
Oscar Pistorius is led out of court in Pretoria. Pistorius received a five-year prison sentence for culpable homicide by judge Thokozile Masipais for the killing of his girlfriend Reeva Steenkamp
voicesThokozile Masipa simply had no choice but to jail the athlete
Life and Style
tech

Board creates magnetic field to achieve lift

PROMOTED VIDEO
News
Russell Brand at an anti-austerity march in June
peopleActor and comedian says 'there's no point doing it if you're not'
Arts and Entertainment
Sister Cristina Scuccia sings 'Like a Virgin' in Venice
music

Like Madonna, Sister Cristina Scuccia's video is also set in Venice

News
i100
Arts and Entertainment
James Blunt's debut album Back to Bedlam shot him to fame in 2004
music

Singer says the track was 'force-fed down people's throats'

Life and Style
The Tinder app has around 10 million users worldwide

techThe original free dating app will remain the same, developers say

News
news

Endangered species spotted in a creek in the Qinling mountains

News
Bryan Cranston as Walter White, in the acclaimed series 'Breaking Bad'
news
News
peopleJust weeks after he created dress for Alamuddin-Clooney wedding
Life and Style
A street vendor in Mexico City sells Dorilocos, which are topped with carrot, jimaca, cucumber, peanuts, pork rinds, spices and hot sauce
food + drink

Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets

Life and Style
health

Some experiencing postnatal depression don't realise there is a problem. What can be done?

Arts and Entertainment
Gotham is coming to UK shores this autumn
tvGotham, episode 2, review
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Senior Pensions Administrator

    £23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

    Corporate Actions Administrator / Operations Administrator

    £25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

    Customer Service Executive / Inbound Customer Service Agent

    £18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...

    ASP.NET Web Developer / .NET Developer

    £60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....

    Day In a Page

    Two super-sized ships have cruised into British waters, but how big can these behemoths get?

    Super-sized ships: How big can they get?

    Two of the largest vessels in the world cruised into UK waters last week
    British doctors on brink of 'cure' for paralysis with spinal cord treatment

    British doctors on brink of cure for paralysis

    Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
    Let's talk about loss

    We need to talk about loss

    Secrecy and silence surround stillbirth
    Will there be an all-female mission to Mars?

    Will there be an all-female mission to Mars?

    Women may be better suited to space travel than men are
    Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

    'They poured water on, then electrified me...'

    If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
    James Wharton: The former Guard now fighting discrimination against gay soldiers

    The former Guard now fighting discrimination against gay soldiers

    Life after the Army has brought new battles for the LGBT activist James Wharton
    Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

    Panic over Ebola threatens to infect the midterms

    Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
    Premier League coaches join the RSC to swap the tricks of their trades

    Darling, you were fabulous! But offside...

    Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
    How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

    How to dress with authority

    Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
    New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

    New book on Ian Curtis sheds fresh light on the life of the late singer

    'Joy Division were making art... Ian was for real' says author Jon Savage
    Sean Harris: A rare interview with British acting's secret weapon

    Sean Harris: A rare interview with British acting's secret weapon

    The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
    Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

    Tim Minchin interview

    For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
    Boris Johnson's boozing won't win the puritan vote

    Boris's boozing won't win the puritan vote

    Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
    Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

    Tim Wheeler: Alzheimer's, memories and my dad

    Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album