Don’t let the energy crisis burn through YOUR cash
As firms go bust and bills soar, Money Mail’s essential guide to keeping power costs down
AN UNPRECEDENTED energy supply crisis is threatening to add hundreds of pounds to our bills as we head for a bleak winter. scores of small power providers are at risk of going to the wall in the coming months — forcing millions of us on cheap fixed deals to pay much more at a time when rising prices and taxes are already hitting our pockets.
Today, experts have told Money Mail that four million households could see their supplier go bust this winter — leaving just ten energy providers left.
Price comparison sites are also now warning they cannot save customers any money, while the cost of rescuing customers from failed firms could add £1billion to the nation’s energy bills. Last night, Green — a supplier to 250,000 homes — was in talks with insolvency advisers.
As the crisis deepens, families are being warned not to panic. Here, Money Mail explains how to keep your cool and beat the heating bills blitz . . .
HOW DID WE GET INTO THIS MESS?
WHOLEsALE gas prices have soared by 250pc this year and 70pc since last month. As a result, energy firms are having to dig deeper into their pockets to supply their customers.
The wholesale price surge is down to a number of factors, including increased global demand as economies recover from lockdowns, low supply from Russia, and a fire in Kent affecting electricity imported from France.
It is feared that small suppliers, which pay for energy by the day, will be particularly hard hit because they cannot afford to offer the low rates they have promised to customers.
Five firms supplying close to 700,000 households have already gone bust in the past six weeks. Bulb, which has 1.7 million customers, has asked for a government bail-out.
WILL MY BILLS GO UP BECAUSE OF THIS?
HOUsEHOLDs are typically either on a fixed-rate deal or a variable tariff.
A fixed deal means you pay a certain rate for a set period of time — perhaps one or two years.
If you are on a fixed-rate deal, your supplier cannot start charging you more for gas and electricity until that deal expires.
so, unless you suddenly start using more energy than usual, you shouldn’t see any difference until the deal comes to an end. If you are on a cheap fixed deal, experts say you should stay locked into that rate for as long as you can.
If you do not switch after your fixed deal ends, you will be moved on to your supplier’s standard variable tariff.
The rates suppliers charge for energy usage on these tariffs are limited by the an industry price cap.
This currently restricts firms from charging any more than £1,138 for the average use.
But this price cap is due to be hiked by £139 next month to £1,277.
Experts also fear it will rise by another £280 when it is reviewed next year.
WHAT IF THERE WAS NO PRICE CAP?
sTANDARD variable tariffs have long been the more expensive option for households, with big savings available to those who find cheap fixed rates via price comparison sites.
But the soaring wholesale cost of gas means that the cap has kicked in and is now stopping firms from passing on the price rise to consumers.
As a result, firms are losing between £300 and £500 for every customer on a standard variable rate over 12 months, according to comparison site GoCompare.
Energy firms are understood to be lobbying the Government to scrap the price cap. Without one, fewer firms may be at risk of going bust because they could hike default tariff prices to meet wholesale costs. It might also mean fixed deals on the market may not be as eye-wateringly expensive.
But Kwasi Kwarteng, the secretary of state at the Department of Business, Energy and Industrial strategy, said this week: ‘The energy price cap, which saves 15 million households up to £100 a year, is staying. It’s not going anywhere.’
WHAT ARE THE BEST DEALS?
COMPARIsON and supplier sites are close to bare — but there are some deals available if you want to switch.
Yesterday, the cheapest deal on the market was Igloo Energy’s standard variable tariff — the Igloo Pioneer — which would cost the average household £1,229 over the year. Meanwhile, the cheapest fixed deal belonged to GoTo Energy, priced at £1,407 until september 30.
Just a year ago the best variable deal was priced at £794 while the cheapest 12-month fix was £817.
Be sure to read the terms and conditions of any tariff carefully before signing up.
some of the cheapest may only allow you to manage your account online and others may require you to have a smart meter.
GO FOR FIXED OR VARIABLE TARIFF?
sTANDARD variable tariffs are now offering some of the best rates on the market, but very few are available to all. Most new customers cannot switch straight
on to the default rate, unless their fixed deal has come to an end. Last night, Igloo was one of the few suppliers still offering its standard variable deal to new customers.
This particular deal is protected by Ofgem’s energy cap. However, suppliers only have to ensure one standard variable tariff abides by the regulator’s limit — so they may have others that can move without limit. Make sure you do your research to find out if this is the case before you switch.
However, if your energy firm goes bust or your deal expires, you can be certain that you will be moved on to a capped deal.
Nobody knows when cheaper deals may return to the market, which means many may choose to sit on the standard variable rate if their old tariff expires or their supplier goes bust. But if you do want to switch, experts say you should aim for a tariff that rivals the price cap.
Last night, fixed one-year deals were priced as high as £1,982, prompting concerns that panicking families could trap themselves into extortionately expensive tariffs.
Joe Malinowski, founder of TheEnergyShop, says: ‘If you are already on a fixed deal, the chances are that it is cheaper than the new standard variable tariff prices, so you should just stay put.
‘If you are on a standard variable tariff, then our recommendation would be that if you can find a fixed deal anywhere near the level of the new higher energy price cap, then grab it.’
HOW DO I KNOW WHAT I AM PAYING?
YOUR latest bill should tell you all you need to know. The document should state what tariff you are on and the month and year a fixed deal will come to an end.
The price you are paying for gas and electricity should also be included in kilowatt hours (kWh). If you are on a fixed tariff, the price in pence per kWh will not change until the deal expires.
This means that two families on the same fixed tariffs could have very different bills depending on how much energy they use.
Most people are charged between 3p to 5p per kWh for gas and around 20p per kWh for electricity — although this will vary depending on which supplier you are with and where you live in the country.
Your bills should also tell you how much energy you are using in kWh. Comparison sites and suppliers will ask for this if you are interested in switching to another tariff.
Rory Stoves, of comparison site Energyhelpline, says: ‘Including your annual usage when you search for a new deal is the best way to ensure you are getting an accurate estimate of how much your bills will be.’
If you have just moved house and you are not sure who your new supplier is, any energy firm can tell you if you provide your address.
CAN COMPARISON SITES HELP ME?
SAVVY shoppers normally use comparison sites to search for the cheapest deals but, after suppliers pulled dozens from the sites last week, their remaining deals are scarce.
Comparethemarket froze its energy switching service last Thursday and other sites, including Uswitch and Energyhelpline, are asking browsers for their email addresses to update them once more tariffs return to the market.
GoCompare’s website warns customers: ‘We probably can’t save you any money right now because there aren’t enough tariffs to compare.’
Comparison sites are all encouraging customers to keep checking their pages, as new deals could come to the market every day.
However, some are only available to customers who sign up directly with the supplier.
WHAT IF SUPPLIER GOES BUST?
AROUND 650,000 households have seen their supplier go bust since the beginning of last month. But industry analysts Baringa Partners found as many as 39 more firms could fail in the next year — leaving ten left in the market.
Jane Lucy, of auto-switching service Labrador, says this could mean around four million households lose their supplier.
When a firm goes bust, energy regulator Ofgem will appoint a new ‘supplier of last resort’ to take on its old customers and the new firm will place them on to its standard variable tariff.
Ian Barker, founder of consultancy firm BFY Group, says future insolvencies could see suppliers of last resort add as much as £1 billion on to customer bills across the UK in an effort to recoup losses.
If your supplier folds, you should take meter readings and again when a new company takes over to avoid any disputes over usage and money owed.
Most people can switch to a new supplier within two weeks of being signed up to a new firm. However, with prices rising so quickly in the past few weeks, very few will end up with a cheaper deal.
As a result, those on a cheap fixed deal could see their bills jump by as much as 60pc if their supplier goes under.
It may be frustrating — but experts say affected customers should not panic. Your energy supply will not be cut off.
WHAT ABOUT AUTO-SWITCH?
AROUND one million people are signed up to an auto-switching service that searches for the best tariffs for their customers. However, most sites will let you know when they are about to switch you to a new deal and ask for your consent before transferring you over.
This means that just because a site finds a new tariff, you should still be able to reject it and roll on to the standard variable tariff if that’s what you want to do.
If a supplier goes bust, the autoswitcher should look around for the cheapest deals and let you know if you can save money by going elsewhere.
But bear in mind that, while some auto-switching services search the whole market, others will only transfer customers to a handful of partner suppliers.
Therefore, it is still worth doing your own research — even if the auto-switcher gives you an idea of what deals could be out there.
WHY ARE SMALL SUPPLIERS AT RISK?
ENERGY firms that touted some of the cheapest tariffs on the market have collapsed weeks later — because they cannot afford to honour the deals.
Last week, Utility Point and People’s Energy both collapsed, leaving a total of 570,000 customers in the lurch between them.
But analysis by comparison site TheEnergyShop shows suppliers were drawing customers in with competitive and even marketleading rates in the months before they went bust.
People’s Energy was offering the second cheapest deal on the market just four days before it collapsed, a variable deal which would cost the average family £1,093. On the same day, Utility Point was offering the fourth cheapest fixed deal — at £1,230.
Simplicity Energy, which had 50,000 customers, launched the cheapest dual-fuel deal on the market at £888.05 on January 15, before ceasing to trade just 12 days later.
Small suppliers often offer some of the cheapest tariffs to draw customers away from energy giants. But, unlike larger firms, they often cannot buy energy in advance and rely on last minute wholesale purchases. And, while small firms often save money through buying wholesale gas and energy this way, the current price surge means they are having to spend even more than larger rivals to supply their customers.
A surge in new customers drawn in by attractively low rates can also overwhelm tiny firms.
Joe Malinowski adds: ‘Small companies often have to offer the cheapest deals because they have no reputations to rely on. But customers are thinking more and more about suppliers going bust — if you pay peanuts you get monkeys.’
CAN I GET MY CASH BACK FROM FIRM?
IF YOUR supplier goes bust while your account is in credit, you will get your money back. And, while Ofgem has no set timeframe for when this should happen, it usually takes around a month, according to Mr Stoves.
Some former customers of crashed firms are waiting significantly longer.
Thousands of former Green Network Energy customers waited nearly five months for their credit refunds after the supplier went
bust in January. But you can go to the Energy Ombudsman if a firm is dragging its heels.
You can still ask for a credit refund even if your supplier is still trading.
However, some firms may require you to have a minimum balance — such as £100 — before they will return your cash.
WHEN IS A DEAL TOO GOOD TO BE TRUE?
WITH so many suppliers expected to fail over the next few months, families will be wary of which deals to switch to. One red flag could be if a firm is failing to return credit refunds to departing customers promptly — as this can be a sign that it is in financial trouble.
Check what customers are saying about it on social media — but bear in mind that firms with larger numbers of customers are more likely to receive more complaints.
Citizens Advice ranks firms for their customer service and publishes league tables four times a year.
Sites such as Trustpilot can also give you a good idea about how a company is performing.