Ditch and switch energy providers

By Martin Lewis, November 18, 2010

Warning: gas and electricity price hikes are back. For the first time in two years, some of the 'big six' energy companies have announced major price hikes. British Gas will increase gas and electricity prices by an average of 7 per cent on 10 December, and Scottish & Southern (S&S) will hike gas prices by 9.4 per cent on average from 1 December. Industry insiders believe more will follow suit, blasting energy prices sky-high. This is an urgent plea to take a few minutes, save yourself £100s, and sort it now before it's too late.

What has happened?

While British Gas and S&S's price hike will directly affect over three million customers, tens of millions are likely to be hit too, as these shock price rises have changed the game. Beforehand, the general consensus was there would be some small price rises --up to around 5 per cent - in January. Now insiders believe companies could bring in bigger hikes much earlier.

Energy companies have a herd mentality: when one moves others follow. One big six energy company EDF has pledged it won't hike standard energy prices before March 2011. Yet the likelihood is that this is an attempt to retain competitive advantage in the short-term and attract switchers. The truth is if you are on EDF's or any other companies' standard tariff, you are already likely to pay £100s more a year than you would by switching to specialist online-billed deals.

Take urgent action

These days we have a two-tiered pricing system. Most people are on standard tariffs which, in the average home, means bills of around £1,200 a year. Yet the energy-savvy only pay around £900 for the same usage, as they have special online-billed tariffs which are massively cheaper.

This £300 annual saving is available to anyone who is on the internet. All it means is you get billed by email rather than by paper. So if you are not already on an online tariff, it is worth switching for three reasons:

● 1. winter is coming

Although it takes minutes to find the cheapest tariff, changing over will usually take a couple of months. Switch now and by the end of December you should be on the new pricing.

Leave it until the cold weather hits, and you will be paying more than you need to until spring.

● 2. cheap online tariffs are disappearing

Many of the cheapest tariffs get closed to new customers after a few months. The longer you leave it, the more you will pay.

● 3. online tariffs should save even if rates go up

Even if you switch to an online tariff and its rate goes up, because the differential is so big, the saving compared to what you would have paid is huge.

Find the cheapest quickly

When you switch, it is the same gas and the same electricity - only price and customer service change - so it is a no brainer.

To switch, use a consumer focus-approved comparison service, such as Energyhelpline, Energylinx and Uswitch, which operate online and over the phone. All you need is one or two past bills and your address.

For a boost, go to comparison sites via my website www.moneysavingexpert.com/gaselec and you will get up to £30 cashback and a crate of wine on top that you wouldn't get direct.

Worth getting a fixed deal?

A fixed tariff is a price promise that the rate you pay won't change for a set amount of time - usually a year or two. Of course, your bill will still go up and down depending on your energy usage.

The very cheapest fixed tariffs are more expensive than the very cheapest variable tariffs, yet online fixed deals are still much cheaper than most people pay right now. The more you would worry about affordability if prices rose, the more you should consider fixing.

It is worth noting fixed deals usually have around £50 early-exit penalties, so in the unlikely event of prices dropping elsewhere, you would need to pay the penalty before you could switch to a different deal.

Dos and Don'ts of switching

● Don't assume dual fuel is cheapest.

● Do switch to a monthly direct debit. This will cut your bill by a further five to 10 per cent.

● Do a meter reading. Don't rely on energy estimates: they are often wrong

● Don't confuse the direct debit amount with the cost. You may switch to a cheaper rate but find you have a higher direct debit because they are not doing it accurately.

● Do avoid prepay meters if you can. They are far more expensive than cheap direct debit tariffs.

● Do consider a financial hardship tariff. If you are in difficulty, some utility companies will offer you special deals. Call them to see if you are eligible.

● Do cut your energy use. Don't leave the heating on full blast while the windows are open. Take sensible precautions to keep your home insulated.

Last updated: 2:29pm, November 18 2010