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.
Sunday 11 October 2009
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.
Fuel poverty could kill 100,000 vulnerable people over the next 15 years, charity warns
Bargain Hunter: Affordable art - suddenly being a collector is just a walk in the park
Phoenix Life: Chance of a refund for overcharged policyholders has risen
Simon Read: You're guilty until proven innocent when HMRC sends in the tax credit detectives
Simon Read: That's right, BT, they'd rather pay for a free service
- 1 Forget 'The Dress': Here are five of the biggest news stories you might have missed
- 2 The black and blue dress: Makers considering a white and gold version
- 3 PornHub turns masturbation into energy in bid to save the planet
- 4 The remarkable archaeological underwater discovery that could open up a new chapter in the study of European and British prehistory
- 5 MH370: 'Putin ordered plane to be flown to Kazakhstan space port,' conspiracy theory claims
New theory could prove how life began and disprove God
Half of Ukip voters say they are prejudiced against people of other races
This is what it's like to be dead, according to a guy who died for a bit
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Aqsa Mahmood branded a 'disgrace' by her parents after claims she recruited three UK girls flying to Middle East
iJobs Money & Business
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...
Day In a Page
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads