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; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Suggested Topics
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

    SThree: Talent Acquisition Consultant

    £22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

    Recruitment Genius: Experienced Financial Advisers and Paraplanners

    Negotiable: Recruitment Genius: This extremely successful and well-established...

    Guru Careers: FX Trader / Risk Manager

    Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

    Guru Careers: Investment Writer / Stock Picker

    Competitive (Freelance) : Guru Careers: An Investment Writer / Stock Picker is...

    Day In a Page

    How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

    How to stop an asteroid hitting Earth

    Would people cooperate to face a global peril?
    Just one day to find €1.6bn: Greece edges nearer euro exit

    One day to find €1.6bn

    Greece is edging inexorably towards an exit from the euro
    New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

    'Iron Man' augmented reality technology could become reality

    Holographic projections would provide extra information on objects in a person's visual field in real time
    Sugary drinks 'are killing 184,000 adults around the world every year'

    Sugary drinks are killing 184,000 adults around the world every year

    The drinks that should be eliminated from people's diets
    Pride of Place: Historians map out untold LGBT histories of locations throughout UK

    Historians map out untold LGBT histories

    Public are being asked to help improve the map
    Lionel, Patti, Burt and The Who rock Glasto

    Lionel, Patti, Burt and The Who rock Glasto

    This was the year of 24-carat Golden Oldies
    Paris Fashion Week

    Paris Fashion Week

    Thom Browne's scarecrows offer a rare beacon in commercial offerings
    A year of the caliphate:

    Isis, a year of the caliphate

    Who can defeat the so-called 'Islamic State' – and how?
    Marks and Spencer: Can a new team of designers put the spark back into the high-street brand?

    Marks and Spencer

    Can a new team of designers put the spark back into the high-street brand?
    'We haven't invaded France': Italy's Prime Minister 'reclaims' Europe's highest peak

    'We haven't invaded France'

    Italy's Prime Minister 'reclaims' Europe's highest peak
    Isis in Kobani: Why we ignore the worst of the massacres

    Why do we ignore the worst of the massacres?

    The West’s determination not to offend its Sunni allies helps Isis and puts us all at risk, says Patrick Cockburn
    7/7 bombings 10 years on: Four emergency workers who saved lives recall the shocking day that 52 people were killed

    Remembering 7/7 ten years on

    Four emergency workers recall their memories of that day – and reveal how it's affected them ever since
    Humans: Are the scientists developing robots in danger of replicating the hit Channel 4 drama?

    They’re here to help

    We want robots to do our drudge work, and to look enough like us for comfort. But are the scientists developing artificial intelligence in danger of replicating the TV drama Humans?
    Time to lay these myths about the Deep South to rest

    Time to lay these myths about the Deep South to rest

    'Heritage' is a loaded word in the Dixie, but the Charleston killings show how dangerous it is to cling to a deadly past, says Rupert Cornwell
    What exactly does 'one' mean? Court of Appeal passes judgement on thorny mathematical issue

    What exactly does 'one' mean?

    Court of Appeal passes judgement on thorny mathematical issue