Britain’s energy suppliers have finally started to cut their prices over the past few weeks, reflecting the collapse in wholesale gas and oil prices that has taken place over the past eight months or so.
Although the reductions in household bills have not been as great as some had predicted, analysts believe there is every chance that there will be a second round of price cuts later in the year.
If you haven’t changed you energy supplier over the past few years, then you can probably wipe hundreds of pounds off your annual bills by taking the plunge now. Websites such as theenergyshop.com, uswitch.com and switchwithwhich.co.uk will help you find the best deal.
But even if you have switched in more recent times, you may still be able to realise even greater savings by moving on yet again this winter.
So far, only four of the big six energy suppliers have announced price cuts this year – British Gas, Scottish & Southern, Eon and EDF. However, the other two – npower and Scottish Power – are expected to follow suit soon. Nevertheless, there’s no need to wait for these announcements to start thinking about making a switch.
“The argument for waiting is based on the fact that we don’t yet know what the remaining two suppliers will do with their own price cuts,” says Joe Malinowski, the founder of the price-comparison site theenergyshop.com. “It’s a point, but it misses the bigger picture, which is that you can get three times the saving by switching now rather than waiting for your supplier to cut your bills for you. And every day you wait is costing you money.”
With wholesale energy prices now falling, the best tariffs to be on at the moment are variable-rate ones. Although the energy futures markets are predicting that prices will start to rise again in 2010 and 2011, household prices are expected to continue falling during the rest of this year.
Malinowski says that the best deal currently on the market is British Gas’s Websaver 2. This guarantees to stay at least 6 per cent below British Gas’s standard tariffs all the way through until June 2010 and the deal is available to both new and existing customers. For anyone on British Gas’s standard tariff, that’s an instant 6 per cent saving – which, for the average family, would be worth more than £70 a year.
But for those who took out fixed-rate tariffs at the end of last year, the savings could be much greater – and it may be worth paying the exit penalty to escape from your current deal.
At the moment, the Websaver 1 package would end up costing the average family around £1,060 a year – for both their gas and electricity. Some of the fixed-tariff deals available at the end of last year, however, would have given the average household a bill of almost £1,500.
If you signed up to a fixed-rate tariff earlier last year, you may, however, be better off staying where you are. “With energy prices set to fall, people who are on fixed-price plans are likely to be worried that they will end up losing money,” says Will Marples, energy expert at uswitch.com. “In fact, the majority of those people who signed up to competitive plans earlier last year are sitting pretty. Prices would have to come down by £185, or 16 per cent, before they would be out of pocket.
“The people who do need to worry are those who signed up to a fixed-price plan towards the end of last year or at the beginning of this year. They are already paying on average £62 more than they would if they were on a standard plan, and £132 more than if they moved online. As prices fall, they will lose out even more.
“Fixed-price deals offer security against price rises in the medium to long term. This peace of mind comes at a premium and customers must consider whether that is more important to them than the benefit of switching now to one of the cheaper online deals. Online plans will offer significant savings for many of these customers, even after paying any exit penalties that may apply.”