There's a rumble in the energy jungle

By Martin Lewis, May 5, 2011
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All the major energy companies have hiked their standard tariffs by up to 10 per cent this year and things could be about to get worse.

The turmoil in Libya and Japan has led some pundits to predict further rises of up to 15 per cent as early as this summer. If true, it could add up to £150 to a typical family's annual bill. So anyone who pays gas and electricity bills - in other words, everyone - must check their deal now.

It's a triple whammy

The entire energy market is highly strung right now. Everywhere you look, it is bad news for consumers, with a triple whammy of problems hitting.

● Predicted price rises

There is not a simple relationship between the wholesale prices energy companies pay and what we are charged. After all, when wholesale prices drop, providers don't always pass the saving on. Yet when they rise, you can bet your noodles we will pay. And right now those wholesale prices are high.

All the energy analysts I have spoken to believe prices will increase at some point this year. Some think it will be by as much as 15 per cent and soon. Personally, I think that is a little overblown; we could see a five-per-cent-rise in the summer and then a further rise later in the year.

What is pretty certain is, if world oil and gas prices stay at their present levels, most of us will be paying more by the end of the year.

● People are being kicked off capped or fixed tariffs

If you are on one of these, urgently check when it ends (or ended). Ten major fixed tariffs ended/end this March, April and May, including British Gas's Price Guarantee March 2011. If you are on one of these, you will usually be automatically shifted to a standard tariff and it will hike your bills massively. You will need to compare, ditch and switch to keep bills low.

● Cheap tariffs are disappearing

The final blow is that providers have pulled many of the super-cheap online deals recently. In practice, this means suppliers close down one cheap tariff to new customers and launch another one with a similar name but with slightly higher rates. The average 'best-buy' deal is up £30-a-year for a typical home, effectively a stealth rise. So if you are going to sort this out, it is best to do it quickly. It is likely (though nothing is guaranteed) that the rest of the cheap ones will be pulled too.

● How to ensure that you are on the best deal

A typical UK home on a standard tariff is paying £1,100 a year for gas and electricity. The same home on one of the cheap online tariffs would pay around £900 a year. It is the same gas, same electricity, same pipes and cables and the same safety. The only thing that is changed is the customer service and billing. That is why doing a comparison is so important.

Please note that I am talking about tariffs, not companies. Each company has a large range of tariffs that it charges customers depending on how they pay, when they signed up, whether they are on an online tariff and so on. This means you could be with the company that offers the UK's cheapest deal, but still be on the country's most expensive tariff. Here are some switching tips:

● Do a comparison using a website with the Consumer Focus Confidence Code (www.consumerfocus.org.uk/get-advice/energy/confidence-code). Put in details of your bill and location, and it will tell you how much the cheapest tariffs would charge. If you are not online, Uswitch, Energyhelpline and others allow you to phone them too.

● The most accurate method is using the kilowatt hours usage that appears on your bill. You can also use the price you pay, and those new to a property can even get an estimate based on location and the number of bedrooms.

● Because so many people switch via my website www.moneysavingexpert.com/gaselec, comparison sites fight to get you to compare and switch through them by offering benefits, such as £40 cashback or a free case of wine. You don't get this if you just go to their websites direct.

● Paying by monthly direct debit is the cheapest way. It can give you a discount of five per cent over all other payment methods. Ensure you give regular meter readings and don't rely on estimates.

● Dual fuel isn't always the cheapest. Remember to check the cheapest gas and cheapest electricity deals separately, as well as the cheapest dual fuel deals.

Should I fix?

With prices rising, many are asking if they should sign up for fixed or capped deals that lock you into a set rate for a time period. This means the rate you pay won't rise no matter what, though bills still vary depending on usage.

While the cheapest fixed deals will mean those who haven't switched are likely to save money straight away, they are around £70-a-year more than the cheapest normal variable deals. So if prices don't go up, you could end up paying more. The more you are worried about bills becoming unaffordable if prices rise, the more you should consider a fixed deal. Effectively, it is an insurance policy that you pay more for now, in order to prevent your prices rising for a certain amount of time.

    Last updated: 12:15pm, May 5 2011