The hidden costs of an unlimited energy deal
They promise a set price no matter how much you use. But there’s a catch . . .
HOUSEHOLDS could miss out on savings of up to £600 a year if they opt for a new type of energy tariff that claims to fix their costs no matter how much power they use.
British Gas, Eon and Green Star Energy have all launched deals promising customers ‘peace of mind’ by charging a set monthly amount regardless of their usage.
But exclusive figures compiled for Money Mail show that, in most cases, these tariffs work out far more expensive than a regular deal. On top of this, some of these so-called unlimited deals actually cap your usage, while others require you have a smart meter installed.
Unlimited deals are likely to appeal to householders who use a lot of gas and electricity, such as large families and people who live in big properties.
And as we head into winter, elderly customers concerned about heating bills may also be tempted — particularly given the recent spate of price hikes.
Just this week, Economy Energy and OVO announced plans to hike bills by up to £311 and £135 a year respectively.
But even for customers who use a lot of power, unlimited deals may not be the best-value option. Green Star Energy’s unlimited tariff costs up to £1,779 a year if you are a high energy user — which is classed by energy watchdog Ofgem as someone using 17,000 kilowatt hours (kWh) of gas and 4,600 kWh of electricity each year.
This is a staggering £593-a-year costlier than the cheapest deal on offer from Powershop (Top Shopper August 2018 Issue 1) at £1,186 a year. It is also £212 a year more than Green Star’s own cheapest tariff, the Amazon Echo +Perks Green 12M Fixed 1808 Paperless, at £1,567, says comparison site Energyhelpline, which based the calculations on a London postcode.
The cheaper deal comes with a free Amazon Echo worth £90 and you can earn reward points to spend at shops and restaurants. For a customer with medium energy usage — someone who typically uses 12,000 kWh of gas and 3,100 kWh of electricity — the tariff works out at £1,320 a year.
This is £368 more expensive than the cheapest deal from Solarplicity (SMART Fixed 2), at £952 a year, and £175 pricier than Green Star’s lowest tariff.
British Gas says its new unlimited tariff means you can ‘turn the heat up without worrying about unexpected bills’. But if you are a medium energy user you will pay £1,200 a year — £248 a year more expensive than Solarplicity.
It’s also £180 more expensive than the company’s own lowest tariff, the Energy Plus Boiler Cover Oct 2019.
Despite being supposedly an ‘unlimited tariff’, the supplier will not allow customers to qualify if they say their energy use is more than 16,500 kWh for gas and 4,500 for electricity — below Ofgem’s definition of ‘high usage’.
If you use the maximum amount of energy allowed under British Gas’s unlimited tariff, you’ll pay £1,440 a year, which is still £30 more than the company’s cheapest deal. And it is £254 more than the best deal on the market for a high energy user from Powershop.
To qualify for British Gas’s unlimited tariff, you must agree to have a smart meter fitted, as with the Solarplicity deal.
These gadgets tell you how much energy you are using in pounds and pence and send your readings directly to your supplier by wireless signal.
But many customers don’t want a new digital meter and have concerns about how suppliers will use the data.
Eon’s Secure Bill tariff also requires you to have a smart meter fitted and calculates the fixed monthly amount you pay based on how much energy you used the previous year. This means that, if you use a lot of energy one year, your bills will shoot up the next.
A customer with medium usage would pay £1,224 a year, which is £272 more than the cheapest deal on the market. It’s also £46 more than Eon’s lowest tariff — the Smart Saver v5, which would cost £1,178.
A customer with high usage would pay £1,692 a year — £506 more than the cheapest rival deal and £44 a year more than Eon’s lowest tariff. Rik Smith, energy expert at uSwitch.com, says: ‘So-called “unlimited” tariffs may sound attractive at face value, but unless you’re planning to drastically increase the gas and electricity you use, they’re far from the cheapest plans on the market.
‘Some may not even allow you to qualify if you say your usage is above a certain amount, meaning they aren’t really “unlimited” tariffs after all.’
Victoria Arrington, of Energy Helpline, says: ‘The tariffs may appeal to those who feel they will use a lot of energy. However, the reality is that even those with high usage may spend hundreds of pounds more than those who simply switched to one of the bargain tariffs on the market.’
Ofgem confirmed this month that a new cap on energy bills will be set at £1,136 a year from December 31 for those with typical usage — saving 11 million households an average of £75. But experts warn that, as suppliers look to offset the cost of the new cap, their cheapest tariffs will creep up.
Eon says its Secure Bill tariff offers customers a personalised price based on their previous year’s consumption. When they save energy, their bills fall the following year so the point of the tariff is not to encourage unlimited usage. It does not have an upper usage cap.
British Gas and Green Star did not respond before we went to press. Green Star’s tariffs in the calculations above are based on a London postcode as regional averages were not available.