Seeing red? Act now to cut your household bills

The best way to combat greedy power companies is to shop around, says David Prosser

It's not the most obvious of alliances, but David Cameron's Conservatives have at least one thing in common with the European Commission. Both have warned this week that competition in the UK's energy markets does not seem to be doing much to ensure customers get a decent deal.

The Commission's preliminary report, which calls for tighter regulation of Europe's energy markets, comes too late, however, to help British gas and electricity customers, for whom the average home energy bill increased by 38 per cent to £1,013 in 2006. Those increases followed three years of rising prices, albeit with more modest hikes in bills.

Energy prices rose sharply last year because of increases in the price of gas on the international energy markets. This has an immediate impact on the cost of domestic gas, but it is also important for electricity because 40 per cent of power in the UK is generated by gas-fired plants.

However, while the price of wholesale gas rose to just over 80p a therm last May, it has since fallen to below 20p a therm today. This is actually below the price at which energy suppliers were buying gas at the beginning of 2003, at a time when domestic prices were around half today's levels.

Suppliers say consumers will benefit from the fall in wholesale prices - eventually. But since the fuel companies buy their gas months in advance, at the prevailing market price, they claim they are not yet able to pass on the reductions.

Meanwhile, consumer groups point to the large profits generated by energy companies. Scottish and Southern Energy posted annual profits of £858.2m last year, for example. Scottish Power's interim results for the second half of the year showed a 77 per cent increase in profits to £483m. And Centrica, the owner of British Gas, reported profits of £200m in the second half, even though it has lost more than a million customers in recent times.

It is against this backdrop that the Conservatives are calling for an investigation of the energy sector by industry regulators and competition watchdogs, following similar calls from the Liberal Democrats. Regulators already have the power to intervene, but have not yet done so.

Ann Robinson, policy analyst at price comparison service uSwitch, says: "Ofgem has threatened to take action against any provider whom it considers to be lethargic in passing on any reduction in prices - it is hoped by all that Ofgem bares its teeth and makes good on this threat."

Joe Malinowski, founder of The Energy Shop, a similar service, adds: "The consumer wants to know why, if we have a competitive energy market in the UK, he is paying over £1,000 a year for his energy when wholesale gas prices have halved in the last six months."

There's no sign yet of an imminent fall in prices, though British Gas has said it will cut prices in April. In fact, some bills are still increasing. Scottish & Southern Energy raised gas prices by 12.2 per cent on 1 January. At the same time, the cost of its electricity rose by 9.4 per cent. British Gas is also piling on the pressure - it has introduced a £5 charge for customers who don't pay their bills within 28 days.

Thousands of customers will also be affected by the end of fixed-price gas deals - at least six will finish in the first quarter of the year.

In these schemes, customers agree to pay slightly more for their gas in return for a guarantee the price won't rise over a specific period. Contracts taken out a couple of years ago from British Gas, Powergen and Scottish Power were a smart bet, but the average customer will see an immediate jump of more than £300 once their deal stops.

It's no wonder that customers are upset. One option for those whose fixed-price deals are expiring is to take out a new guaranteed contract.

However, Karen Darby, chief executive officer of Simply Switch, warns that could prove an expensive mistake. If suppliers do start cutting prices this year, customers on fixed-price deals would lose out.

Companies such as uSwitch and Simply Switch have been urging home energy customers to hunt out cheap energy deals for years, as have consumer groups. "Wholesale gas prices may have been falling but householders will have to seek a better deal by switching suppliers," says Darby.

Around half of all households have never switched supplier and those who have done so may be able to save money by moving again. For a task that is relatively hassle-free, the potential savings are dramatic, as the table above shows. In all of the examples, the difference between the most expensive supplier and its cheapest rival is at least 16 per cent, or £104 a year. The biggest saving available is more than 30 per cent.

There are other ways to save money. All energy companies offer preferential rates to people who pay by direct debit. Those who pre-pay, particularly using meters, on the other hand, lose out. In addition, your energy company has a duty to provide you with information on energy-efficiency, to help cut bills.

Switching supplier, however, is the real money saver and should take no more than a month to complete. The easiest way to find the best deal is to use the price comparison services, which will even arrange the switch on your behalf, free of charge. Your existing supplier will require a final meter reading, but the switch requires no change of equipment - it's purely administrative.

A water meter could save you money

* Water bills are an increasing burden for households. Just two of Britain's 22 water companies last year chose not to impose the maximum increase on customers allowed by Ofwat, the industry regulator. Average bills in England and Wales rose by 5.5 per cent last year to £294, following an 11 per cent increase in 2005. Further bill rises are certain for this year.

* To add insult to injury, companies such as Thames Water announced large increases in profits while failing on many other measures. Thames, which missed its target for cutting leakages for the fifth year running in 2005 and imposed hosepipe bans on customers, was sold for £9bn in October to a group of overseas investors.

* Unlike the gas and electricity markets, water customers can't shop around for a better deal - you're stuck with the supplier that operates in your area. But that doesn't mean you can't save money, particularly if you live in a smaller household.

* Water companies charge people on the basis of the type of property they live in, rather than on how much water they actually use. So if you have an identical house to the family of five next door, but live on your own, you'll pay the same water bill as them.

* The solution is to exercise your right to have a water meter fitted, so that your bills are based on usage. A spokesman for the Consumer Council for Water explains: "Domestic customers can request a water meter which is fitted free of charge unless the location or pipework makes it impractical or uneconomic for the company to do so."

* Water suppliers are required to advise customers on whether installing a meter will save money. The water companies publish "ready reckoners" to help you make the calculations and many have online calculators on their websites. Even better, installing a water meter is not a gamble - if the change doesn't save you money, you have the right to change back to the old system, as long as you ask to do so within 12 months.

No need to ring up expensive phone and internet charges

* It's getting easier and easier to cut the cost of your home phone bill, as BT comes under increasing pressure to give rivals access to its networks and infrastructure.

* Martin Lewis, who runs the Moneysaving internet site, says the biggest savings are available to those who currently have - or want to get - broadband internet access. TalkTalk's £20 a month deal for both services is the cheapest deal on the market by some way, he says. For that price, all your internet access and all calls to UK landlines are covered.

* If you don't need broadband, or don't want to change your existing supplier, Lewis recommends renting a line from BT at £11 a month and requesting its Together Option 1 package. He then tips Primus (call 0800 036 0094 for details) as the cheapest supplier of calls. Its Saver 2 deal offers free weekend and evening calls to landlines, though other deals may be cheaper if you regularly make more than six calls during the weekdays.

* Lewis also points out that for both combined broadband and phone, and phone-only, customers, it's possible to save even more money by using different call suppliers for calls to mobile phones and overseas numbers. To access these services, you typically dial a number to get into their networks and then the actual number you want. You usually pay via your normal call supplier's bill, but at the "override" provider's charges.

* Lewis's site includes a daily updated list of override providers that shows the cheapest service for each type of call. "In a world where prices constantly rise, the phone is now cheaper than ever before," he says.

Compare with the Independent: See how much you could save by switching credit cards. Compare now

Suggested Topics
For the Love of God (2007) The diamond-encrusted skull that divided the art world failed to sell for
its $100m asking price. It was eventually bought by a consortium
which included the artist himself.
voicesYou can shove it, Mr Webb – I'll be having fun until the day I die, says Janet Street-Porter
Mercedes driver Lewis Hamilton of Britain drives in the rain during the qualifying session of the Chinese Formula One Grand Prix in Shanghai
indybestFake it with 10 best self-tanners
Arts & Entertainment
Madonna in her music video for 'Like A Virgin'
music... and other misheard song lyrics
Much of the colleges’ land is off-limits to locals in Cambridge, with tight security
educationAnd has the Cambridge I knew turned its back on me?
Steven Gerrard had to be talked into adopting a deeper role by his manager, Brendan Rodgers
sportThe city’s fight for justice after Hillsborough is embodied in Steven Gerrard, who's poised to lead his club to a remarkable triumph
peopleOrlando Bloom the pin-up hero is making a fresh start
Who makes you happy?
happy listSend your nominations now for the Independent on Sunday Happy List
Life & Style
The North Korean TV advert for Taedonggang beer, that became a YouTube hit
food + drinkAnd what did it take to set up a taste test back in Wiltshire?
Arts & Entertainment
filmLife for Leslie Mann's can be challenging sometimes
For music lovers: John Cusack with his vinyl collection in 'High Fidelity'
voices...but don't forget rest of the year
The energy drink MosKa was banned for containing a heavy dose of the popular erectile dysfunction Levitra
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition iPad app?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    1st Line Helpdesk Engineer Apprentice

    £150.00 per week: QA Apprenticeships: This company has been providing on site ...

    Telesales & Sales Support Apprentice

    £221.25 per week: QA Apprenticeships: This company is a well established Inter...

    Client Relationship Manager - SQL, Python

    £40000 - £50000 per annum: Harrington Starr: Client Relationship Manager - SQL...

    **Financial Services Tax**

    £35000 - £50000 per annum: Pro-Recruitment Group: Take your chance to join the...

    Day In a Page

    How I brokered a peace deal with Robert Mugabe: Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC

    How I brokered a peace deal with Robert Mugabe

    Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC
    Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'

    British Muslims's Happy video attacked as 'sinful'

    The four-minute clip by Honesty Policy has had more than 300,000 hits on YouTube
    Church of England-raised Michael Williams describes the unexpected joys in learning about his family's Jewish faith

    Michael Williams: Do as I do, not as I pray

    Church of England-raised Williams describes the unexpected joys in learning about his family's Jewish faith
    A History of the First World War in 100 moments: A visit to the Front Line by the Prime Minister's wife

    A History of the First World War in 100 moments

    A visit to the Front Line by the Prime Minister's wife
    Comedian Jenny Collier: 'Sexism I experienced on stand-up circuit should be extinct'

    Jenny Collier: 'Sexism on stand-up circuit should be extinct'

    The comedian's appearance at a show on the eve of International Women's Day was cancelled because they had "too many women" on the bill
    Cannes Film Festival: Ken Loach and Mike Leigh to fight it out for the Palme d'Or

    Cannes Film Festival

    Ken Loach and Mike Leigh to fight it out for the Palme d'Or
    The concept album makes surprise top ten return with neolithic opus from Jethro Tull's Ian Anderson

    The concept album makes surprise top ten return

    Neolithic opus from Jethro Tull's Ian Anderson is unexpected success
    Lichen is the surprise new ingredient on fine-dining menus, thanks to our love of Scandinavian and Indian cuisines

    Lichen is surprise new ingredient on fine-dining menus

    Emily Jupp discovers how it can give a unique, smoky flavour to our cooking
    10 best baking books

    10 best baking books

    Planning a spot of baking this bank holiday weekend? From old favourites to new releases, here’s ten cookbooks for you
    Jury still out on Manchester City boss Manuel Pellegrini

    Jury still out on Pellegrini

    Draw with Sunderland raises questions over Manchester City manager's ability to motivate and unify his players
    Ben Stokes: 'Punching lockers isn't way forward'

    Ben Stokes: 'Punching lockers isn't way forward'

    The all-rounder has been hailed as future star after Ashes debut but incident in Caribbean added to doubts about discipline. Jon Culley meets a man looking to control his emotions
    Mark Johnston: First £1 million jackpot spurs him on

    Mark Johnston: First £1 million jackpot spurs him on

    The most prize money ever at an All-Weather race day is up for grabs at Lingfield on Friday, and the record-breaking trainer tells Jon Freeman how times have changed
    Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

    Ricky Gervais: 'People are waiting for me to fail'

    As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
    Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

    Mad Men returns for a final fling

    The suits are still sharp, but Don Draper has lost his edge
    Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

    Google finds a lift into space will never get off the ground

    Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit