Is it time to pull the plug on your energy supplier?

As a price war rages, now is the perfect time to switch providers

There has never been a better time to search for cheaper gas and electricity. The UK's biggest energy suppliers are locked in a fierce price war and consumers are benefiting from reduced bills and better levels of service.

More than 2.8 million people have already taken advantage of the situation and changed suppliers, according to statistics for the first seven months of the year published by Ofgem, the industry regulator.

And it has urged anyone who has been with the same company for more than a few months to shop around because it is possible to make annual savings of £170 simply by moving onto a better tariff.

Ofgem chief executive Alistair Buchanan says energy companies are also competing on levels of innovation and quality of service instead of just price because surveys have shown these are the main reasons why people make the switch.

"The heat is still on suppliers to offer customers the best deal for their energy," he said. "With winter drawing in and all suppliers having lowered their prices, now is a good time for all customers to check whether they are getting a good deal."

A string of energy suppliers, including Scottish Power and EDF Energy have been gradually reducing their prices since the beginning of the year, but the fight has certainly intensified over the last couple of weeks.

Rivals British Gas and Scottish & Southern Energy have been leading this latest charge by indulging in a remarkable spate of tit-for-tat reductions which has even taken industry observers by surprise.

Paul Schofield, head of utilities at Moneysupermarket.com, admits he did not expect the companies to be battling it out for supremacy and believes it is difficult to predict if further cuts are on the way.

"British Gas has lost an awful lot of customers over the past two years because of the price increases they imposed and now seem intent on growing their customer base," he said. "It may well be that they don't have any appetite to make further cuts but the company has so far responded to the likes of Scottish & Southern every time."

Although the average dual fuel energy bill has tumbled by £200 to £745 during the past 12 months, the string of price hikes previously imposed means it is still 17 per cent higher than the £640 level of three years ago, according to SimplySwitch.com.

Karen Darby, founder of SimplySwitch.com, believes the actions of the energy companies amount to little more than a phoney war and insists they could all do much more to improve the deals being offered to consumers.

"Energy suppliers are not writing to customers saying prices are falling, they are simply jostling for position on the price comparison charts," she insisted. "They know it's key to be seen as being top of the charts and that's why they are tinkering with their tariffs to produce something that comes out a bit cheaper than their rivals. British Gas is currently in pole position – but literally by a matter of pence."

Prices may have gone down by about 20 per cent this year, added Darby, but further reductions were expected and this makes it even more important for customers to constantly search for the best available deals.

"Wholesale prices paid by the companies aren't showing any signs of increasing, energy companies are making huge profits and consumers are still paying a premium price," she said. "The pressure is now on customers to be vigilant about better offers because the most competitive deals are only available for those who switch.

"There are no prizes for loyalty and those who don't switch are effectively subsidising the rest."

Easy steps to cheaper bills

You first need to find out exactly how much you are currently paying. This can be done by looking at your last four quarterly bills. Then you can start looking around.

Suppliers will usually offer a variety of payment options to customers and this can affect the prices charged, according to Energywatch, the independent watchdog, which also recommends checking to see if there are penalties for cancelling contracts.

Rather than speaking to each individual supplier, a popular way of finding out what is available is by visiting a price comparison website such as Moneysupermarket.com, SimplySwitch.com or uSwitch.com

As well as detailing the latest price changes and telling you which companies are operating in the local area, these sites also allow you to start the process of switching supplier which usually takes around six weeks to complete.

Not only will your new supplier use exactly the same wires, pipes and meters but it will also contact your existing supplier to arrange the transfer of your supply. The only change you will notice is the name of the company sending you the bill.