Don’t let energy price hike hit you in the pocket
MONEYSAVING EXPERT MARTIN LEWIS OUTLINES HOW YOU CAN SAVE HUNDREDS OF POUNDS A YEAR ON RISING ENERGY BILLS
Many big firms do not offer their best deals direct
MoneySavingExpert. com founder Martin Lewis
IT’S predictable, but depressing. The big six energy firms have all now announced they’re hiking standard tariff prices by 9% on April 1. This will hit over half the homes in the UK. Yet you needn’t accept the price hike – sadly, in many ways it’s a fine on customers for apathy, confusion, or complex set ups.
Instead, you can simply switch tariff. Everyone should be checking now. Many can save at least £200 a year.
This is all about standard tariffs
It’s the default deals that energy firms put customers on who’ve never switched, haven’t chosen a special rate, or once that rate finishes. It’s always expensive. Yet for the last couple of years they have been governed by a price cap that’s set every six months.
A few weeks ago it was announced that from April 1 the direct debit dual-fuel price cap would rise from £1,042 to £1,138 a year for someone on typical usage. This is primarily due to the wholesale rate of energy (those the firms themselves pay) having gone up rapidly after bottoming out due to low usage in the first Covid-19 wave.
A price cap isn’t really a cap
In truth, while it’s called a price cap it’s actually the rate for each unit of energy that’s capped. There’s no maximum energy bill you will pay. If you’ve high usage you’ve a higher cap, lower usage, a lower cap. And whilst the cap may be a ‘fair’ price, it certainly isn’t a good one. In fact, since the price cap has been in place, it’s been on average £200-a-year more expensive than the cheapest tariffs. To show the size of the savings possible, here’s a tweet I got from Sarah “@MartinSLewis just gone on to MSE energy saving and switched, saving over £400 on my energy bill, £500 with the price increase in April. Thank you” All the big brands – British Gas, SSE, Scottish Power, Npower, Eon, EDF, respond to the price cap change, and like sheep they’ve set their new standard tariffs within £1 of it. For those on prepay meters the price cap is going up by 8%.
That means if you’re on one of these tariffs – which over half of UK households are – then you’ll see your bills jump.
Now’s the time to compare prices
When the price cap rise was announced, many people flooded to comparison sites. Yet that was in some ways too early; compared then, and the savings you were shown would be against what you pay today – the rate before April – so it was likely undercalculating by over £90/yr.
The small saving may have wrongly put some off switching. Yet now all of the rate cards for big firms have been published, so comparison sites have the right details, and you can see an accurate savings figure. It’s worth noting that for those who have got a cheap tariff within the last 12 months, do a comparison and it’s likely you’ll find today’s cheapest tariffs more expensive than yours, because of that increase in wholesale prices – in which case unless your deal ends soon, stick where you are.
Don’t go direct
Many big firms do not offer their best deals direct. They ONLY allow you to sign up for the cheapest tariff via comparison sites. That way they hope to win new business from those who are looking to switch, but can keep existing customers on higher tariffs. These sites are also useful
because there’s no one cheapest provider – your cheapest depends on your region and usage.
Comparison sites get paid if you can switch through them (including mine at cheapenergyclub.com – though if we get paid, we give you roughly half – £25 as cashback which you wouldn’t get direct). Sadly, to aid profitability most sites then have a default setting which hides tariffs that don’t pay them, so you don’t get a whole of market comparison (mine doesn’t, it includes all by default).
There’s a list of comparison sites at ofgem.gov.uk.
There are also now sites that can automatically switch you each year. These tend to fall into two camps, those that charge a fee and look across the market, or those that are free but they work off a very small panel of providers.
Don’t let details stop you switching
Even if you just know your existing provider’s name you should still do a comparison. It’ll be more accurate if you have your tariff details and can plug your usage in too. Yet if you’ve not switched in years, you’re almost certainly on an expensive standard tariff, and overall the sin of inaction is usually bigger than the sin of inaccuracy – so let the comparison site estimate for you.
Are you having to choose between heating and eating?
Many are struggling right now, so as well as making sure you’re on the cheapest tariff and reducing your usage, simpleenergyadvice.org.uk (England) and nest.gov.wales can guide you on what other help is available.
And if your financial problems are due to the lockdown or Covid-19, Ofgem has put in place rules to help.
Most importantly, your supply won’t be cut off – disconnections of standard credit meters have been completely suspended, while new rules have been put in place to ensure prepayment customers get emergency or additional credit to keep the lights on. Speak to your energy firm.
Watch the Martin Lewis Money Show: Live on ITV, Thursday at 8.30pm.