Switch on to saving energy – and cut your bills

Gas and electricity prices are spiralling, putting household budgets under even more pressure.Now is the time to change your supplier and reduce consumption, says Rob Griffin

(GETTY IMAGES)

The cost of energy has been the hot topic, if you'll excuse the phrase, of the past week, with top billing on the evening news and seemingly endless column inches devoted to the subject of whether suppliers should give consumers a better deal.

On Monday a summit took place between Government figures, industry officials, various consumer groups and a string of energy companies at which a package of measures was discussed, including ways of making it easier to compare and switch suppliers. This followed the publication of regulator Ofgem's radical plans to overhaul the industry as part of its quest for a simpler, more competitive energy market, with easily understandable tariffs, clearer bills and annual statements.

However, nothing that has been discussed – or agreed – in recent weeks is likely to be implemented overnight. Ofgem's proposals, for example, won't go out for wider consultation until next month so changes won't be made until next summer at the very earliest.

An Ofgem spokesman confirmed that final proposals are expected to be published in the early part of next year but if the energy companies have issues then the whole subject could be referred to the Competition Commission which would then carry out its own analysis.

So what can consumers do in the meantime? According to Mike O'Connor, chief executive of Consumer Focus, there are two main ways of reducing their bills – shopping around for the best deals from suppliers, and making their homes energy efficient. Doing both could save the average family hundreds of pounds every year.

He said: "Many people simply don't think there is much point changing tariff, payment method or supplier but they could be losing out on hundreds of pounds a year because their home leaks heat or they're missing out on a better deal."

switching energy suppliers

Research by home insurance provider swiftcover.com has found gas and electricity bills are the biggest financial worry of Britons with 39 per cent having cited utility bills as their top concern - ahead of meeting the monthly mortgage repayments.

Amanda Edwards, the company's senior marketing manager, believes the problem is as universal as it is troubling. "Staying warm during winter should be a right, but with rising prices, it is increasingly becoming a privilege," she said. "When you think of all the snow last year, it's clear how difficult it is to live without central heating but paying the bill is clearly causing people misery."

However, despite the findings of such surveys, the fact is that relatively few people are shopping around. In fact, more than half of households have never switched, according to analysis by MoneySupermarket.com, and could thus be paying well over the top for their energy.

Scott Byrom, energy manager at MoneySupermarket.com, points out that the most recent bout of price hikes have added an average 17.4 per cent to the cost of gas and 10.8 per cent to electricity, which means average combined annual bills of £1,287.

"Those who aren't shopping around for the best deal are simply burning money. Finding the right tariff for their consumption level and region means bill payers could save on average £237 per year," he said. "The cheapest online tariff available is npower's Sign Online 24 with annual bills of £1,050 on average, but, for the same price, consumers can protect themselves against future price rises with EDF Energy's Fix for 2012 tariff with bills fixed at £1,050 until 31 December 2011."

Step one: find out how much you are paying

Before hunting out a better deal, you need to know how much you are paying out. This can be done by looking at your last four quarterly bills.

For accuracy, it's best to use bills based on actual meter readings rather than estimates, while your annual statement will also detail how much you spent on energy in kilowatt hours (kWh), according to Consumer Focus.

Step two: collect other relevant information

You also need to find out the name of your existing tariff and how you currently pay – namely by cheque, direct debit, online or via a prepayment meter. In the same vein, you should know how you want to pay in the future. Generally, direct debit and online payments usually work out cheaper than alternative methods; although that's something you will need to confirm.

Step three: find the best deals

The good news is there's no shortage of ways to find the best deals – but that is a double-edged sword as the process can appear to be unnecessarily complicated. First, you can talk to a salesperson at one of the firms, although they will clearly have vested interests so it's also worth visiting one of the many price comparison websites to see what deals are available.

Step four: choose your new provider

The good news is there won't be any interruption to your electricity or gas supply during the process of switching suppliers. Your new energy supplier will ask you for a meter reading which they will pass to your old supplier to that you can be billed for any outstanding money owed.

The new supplier will then let you know the date from which they will start their supply. The whole process should be completed within six to eight weeks. It is certainly a worthwhile exercise, according to Justin Modray, founder of website Candid Money, who recently switched to an npower online tariff on moving house – from the previous owner's standard Eon tariff – and estimates this will save him £120 a year.

"Depending on your energy usage and current tariff, switching energy providers could save you over £100-a-year and using a cashback website like Quidco allows you to pocket the sales commission that comparison websites would otherwise receive," he said.

"Switching providers is straightforward, but beware of locking yourself into a long-term contract, because if the tariff becomes uncompetitive you may face a penalty if you want escape elsewhere."

Make your home energy efficient

The average home can save up to £280 a year through being more efficient, according to the Energy Saving Trust (www.est.org.uk), which launches its annual Energy Saving Week on Monday with the focus on how to take back control of your spiralling energy bills.

Richard Bryson, Energy Saving Trust Energy Doctor, believes that everyone can start saving money immediately by implementing some small – yet extremely effective – behavioural changes around their homes.

For example, around £35 a year can be saved simply by turning appliances off at the plug rather than leaving them on stand-by. Another £60 can be shaved off the annual bill by turning the central heating thermostat down by just one degree.

"The first thing to do when looking to reduce your energy bills is to consider insulating your home with loft and cavity wall insulation, as the savings which can be made by properly insulating your home are enough to get all homeowners to sit up and take notice," he said. "Everyone can do their bit to reduce their energy consumption and start saving money on their energy bills; and insulation is the ideal place to start given there are so many discounts on offer around the UK."

According to the Trust, cavity wall insulation can save you around £135 a year on fuel bills, while insulating your loft will save around £175. In fact, it is estimated that if everyone topped up their loft insulation to 270mm, a combined total of £930m would be saved each year.

Also worth considering is insulating beneath floorboards. This could save £60, while a further £25 could be taken off the annual bill by filling gaps and cracks around floors and skirting boards. Draught-proofing around doors and windows, meanwhile, will help to the tune of £30.

Don't forget double glazing. This cuts heat lost through the windows by 50 per cent, which equates to a bill reduction of £165 ayear. If you can't afford to replace all your windows, then the advice is to concentrate on those in rooms such as the living room, which are occupied the most.

Energy can also be saved depending on the products you buy. Look for the Energy Saving Trust Recommended logo on new electrical appliances – this is a quick and easy way to spot the most energy-efficient models. The Trust estimates that replacing an old, inefficient fridge freezer with a new energy-saving recommended version could save you £26 a year.

Installing solar photovoltaic cells – which can be put on your roof or walls and capture the sun's energy, which is then turned into electricity – can not only cut your bills but potentially make you money as well.

Once you have paid for the initial installation, your electricity costs should be significantly reduced . The Energy Saving Trust suggests that a typical home solar PV system can produce around 75 per cent of the electricity a household uses in a year.

You can potentially make money on any excess electricity by selling it back to the grid through a scheme known as Feed-In Tariffs, which became available in April last year.

However, solar installations do not come cheap. Although prices will vary, you will probably be looking at the best part of £12,000 – and you would also be advised to check with your Local Authority Building Control officer that the work will comply with existing regulations.