Cash-strapped energy customers face another battering this year as gas and
electricity companies queue up to deliver another eyewatering round of price
rises. The size of the latest increases has prompted the energy watchdog to
call on the Competition Commission to investigate the industry.
First off the blocks was npower, the fourth-largest supplier in the UK. It
announced increases averaging 19 per cent, or £99 a year, for gas and 13 per
cent, or £48 a year, for electricity, though some customers suffered rises
of up to 27 per cent. The average annual bill for a household taking gas and
electricity from npower will now rise by a hefty £147 to £1,014.
Next was EDF, the fifth-biggest supplier, which said that it is raising gas
prices by 12.9 per cent and electricity prices by 7.9 per cent, representing
average annual increases of £74 and £28 respectively. The average dual-fuel
bill rises by £100 to £986 a year.
Third was British Gas, which lifted gas and electricity prices by 15 per cent.
Average gas bills climb £83 to £622 a year while electricity is up £54 to
£404. Dual-fuel bills rise by £137 to £1,011. Powergen, the country’s
third-largest energy supplier, is understood to be planning a double-digit
price increase soon.
Other energy companies are set to follow suit as wholesale gas and electricity
prices continue the sharp rise that started last summer. Since the start of
this year gas prices have spiked upwards by 15 per cent and electricity
prices by 10 per cent. Forecasters expect gas bills to rise by 15 per cent
to 17 per cent over the next 12 months, while electricity charges are
expected to climb 10 per cent.
So why are we paying so much? Alan Asher, chief executive of Energywatch, the
consumer watchdog, says that it is because price regulation in the UK has
been dropped in favour of regulation by competition, which has not had the
desired effect. The latest price rises have prompted him to call for the six
largest suppliers – British Gas, E.ON, Scottish and Southern Energy, npower,
EDF and ScottishPower – to be referred to the Competition Commission.
The idea was that having lots of different gas and electricity companies
fighting hard for our custom would lead to keener prices. In reality, what
has happened is that giant energy companies have slowly bought up the
smaller suppliers, thus eroding the potential for competition.
Mr Asher says: “At the beginning of the liberalised market ten years ago there
were 26 energy suppliers in the UK. There are now only six major suppliers
of gas and electricity. Of these, four are owned by European energy groups,
such as EDF, of France, and RWE, of Germany. As former state-run utilities,
these companies have little experience of, or interest in, price
competition.”
Most energy experts are urging the estimated 17 million npower, British Gas
and EDF customers hit by the price rises to switch now. Joe Malinowsky, of
TheEnergyShop.com, says: “Even before the increase, npower customers on a
standard tariff could have saved £90 a year by switching to the cheapest
deal. After the latest increase, the potential annual saving has shot up to
£237.”
Although the biggest savings are to be made by switching to an uncapped
tariff, Mr Malinowski says that npower, EDF and British Gas customers would
be better off with one of the best capped deals. These guarantee that the
tariff will not rise above a certain level but is free to fall in line with
any drop in general market rates. The best of these is ScottishPower’s
Online Energy Price Fall, which will cost dual-fuel customers an average of
£796, paying by monthly direct debit. Although it runs only until November
and is about £50 a year more expensive than the cheapest uncapped tariff, Mr
Malinowski reckons that it will more than pay for itself as energy suppliers
increase rates across the board.
ScottishPower’s decision to remove the deal from price comparison websites
shows how good this deal is. It is still available through ScottishPower’s
own site, which is accessible through www.theenergypeople.com,
but would-be customers will have to act quickly because the company has said
that it will close the offer soon.
The second-cheapest capped offer is E.ON/Powergen’s Price Protection deal,
which runs until October next year. It will cost an average of £904 a year
for customers who pay by monthly direct debit – about £100 more than the
ScottishPower cap but offering an additional year’s ceiling on energy
prices.
Households that are keen to chase the very cheapest uncapped deals face a
difficult choice, as switching now could look a bad move in a few months’
time after the anticipated round of price increases. Martin Lewis, the
founder of moneysaving expert.com, the consumer website, says: “It is likely
that any savings you make by switching will be eaten up some time in the
next month or so when that company announces a price rise.” He adds that
price comparison websites have a vested interest in trumpeting the “switch
now” call because each switch nets them between £20 and £60.
But for customers who are determined to take advantage of the current best
buys TheEnergyShop. com reckons that the Click Energy 4 online dual-fuel
offering from British Gas is the most competitive, with an average annual
bill of £742.
Mr Malinowski says: “There is a danger that the next round of price increases
will make it look less attractive, but it is currently the best deal by a
margin of £26 a year. In addition British Gas is aware that the sort of
customers opting for Click Energy 4 tend to be price-sensitive consumers who
will leave if it raises prices too much.”
However, there is one group for whom switching energy supplier is a
no-brainer: the 13 million customers who have never switched at all. Ofgem,
the regulator, calculates that someone who has never moved from British Gas
or the original regional electricity supplier could save an average of £200
by switching now.
CASE STUDY
KINDRIE HILL, of Halifax, West Yorkshire, expects to save several hundred
pounds on her energy bills by switching supplier.
Mrs Hill, left, lives in a three-bedroom house with her husband and two
children. The 34-year-old’s monthly dual-fuel bill with British Gas was
£130, but a newspaper advertisement at the beginning of December persuaded
her to check uSwitch, the comparison website, where she found a cheaper deal
with Southern Electric, part of Scottish and Southern Energy.
USwitch calculated that her annual savings would be about £300. She asked to
change supplier and the operation was completed by the end of December. “My
new supplier handled the administration and the switch went very smoothly,”
she says.
Bright ideas to save energy and money
WITH gas and electricity prices set to soar, hard-pressed consumers have an
added incentive to reduce bills by saving energy. Most households could save
about £250 by becoming more energy-efficient. The Energy Saving Trust (EST)
has a list of measures that could knock pounds off your annual fuel costs, –
and reduce your carbon footprint into the bargain.
Homes lose up to 33 per cent of their heat through the walls, but cavity wall
insulation can help to prevent this, bringing a big reduction in your
heating bill. Saves up to £90 a year.
Putting at least 25cm (10in) of loft insulation in a previously unlagged attic
will help to prevent a lot of expensive hot air from simply escaping through
the roof. Saves about £110 a year.
Installing double glazing not only cuts heat loss through windows by about 50
per cent, it also allows you to cut your heating bills. Saves up to £90 a
year.
Changing to an energy-efficient condensing boiler should enable you to cut
your heating bills by a third. Saves about £250 a year for a typical
household.
When looking to replace your fridge or freezer, seek out the energy-saving
logo on any potential replacement. An appliance that wastes less energy will
help you to reduce your electricity usage. Saves up to £37 a year.
Wrap your hot water tank in a luxurious new 7.6cm (3in) jacket and you could
see a comfortable reduction in your fuel bill. Saves up to £20 a year.
Use energy-efficient light bulbs; they last about ten times as long as
conventional bulbs. Saves £7 a year on your electricity bill for each one
used.
Don’t leave your household appliances on standby, switch them off at the
mains. Saves up to £28 a year on your electricity bill.
Stop draughts by filling gaps under skirting boards with sealant. Saves £20
a year on heating bills.
