Cheaper fixed price tariffs for gas and electricity are likely to become more elusive, writes Jeff Salway
HOUSEHOLDS are being urged to freeze their bills this winter to avoid the price hikes announced by the UK’s biggest energy suppliers over the past few weeks.
Fixed rate tariffs are the quickest and most effective way for households to protect themselves from the price rises coming into force over the coming weeks – but the best deals may not be available for long.
Energy bills are set to hit new record highs following the increases set out by four of the big six energy suppliers, with the average household bill set to hit £1,400 a year. Only EDF and Eon have yet to act, the latter having guaranteed a price freeze for 2012.
Scottish & Southern Energy’s (SSE) 9 per cent increase, announced in August, came into force last Monday for its 9.6 million customers. That was the day that ScottishPower revealed its gas and electricity prices would go up by an average of 7 per cent from 3 December, affecting some 2.3 million households.
The typical ScottishPower customer paying a dual fuel bill by direct debit will see their annual bill jump by 8.7 per cent to £1,271, while there’s an increase averaging 1.4 per cent to £1,368 in store for those paying on receipt of a quarterly bill.
Clare Francis, consumer expert at Moneysupermarket.com, said: “Surprisingly, ScottishPower has staggered increases to customers depending on the method of payment. Worst affected are those on ScottishPower’s standard tariff who pay monthly by direct debit and customers with pre-payment meters.
“After being encouraged for years to switch to a monthly direct debit option, it’s a slap in the face to penalise those who have done so by hitting them with the biggest price increase.”
Its move came just days after Scottish Gas said prices would go up 6 per cent from 16 November and Npower announced gas and electricity rises of 8.8 and 9.1 per cent respectively, coming into force on 26 November.
The announcements mean that more than 20 million UK households face higher energy bills this winter. But with the increases affecting the bulk of households not coming into force for several weeks, there’s still time for evasive action.
The easiest way to counter the increases is to switch to a fixed online tariff. Not only can these protect you from the price hikes coming over the next few weeks, but they also offer protection against further increases in 2013.
The cheapest fixed rate deal, Npower’s Energy Online tariff, is fixed at an average of £1,071 a year until January 2014 (based on medium gas and electricity usage). In contrast, the average household on a standard ScottishPower tariff is paying £1,368 a year, according to Moneysupermarket.com.
ScottishPower’s cheapest fixed rate tariff, the Online Fixed Price Energy, would see the average household paying £1,140 a year until April 2014.
SSE has a fix that would give the average household a £1,238 a year bill until December 2014, a saving of £116 a year, while Scottish Gas has an online variable tariff fixed until next November that averages out at £1,120.
But surging demand for fixed rates in the wake of the price rise announcements means that some of these fixed tariffs could be withdrawn sooner rather than later, to be replaced by more expensive options.
Tom Lyon, energy expert at uSwitch.com said: “If consumers want to protect themselves from future price hikes there are still some competitive fixed price plans available, but they are not going to be around for long.”
The cheapest fixed rate has already risen by £48 a year from £1,040 to £1,088 since SSE made the first move in August, according to Energy- helpline.com.
Fixed rates aren’t always suitable, however. They’re virtually all online deals payable only by direct debit and, increasingly, feature only paperless bills. Households with little or no internet access may struggle to access and manage such deals, with many people in their seventies and eighties effectively excluded from the fixed rate market.
There are also a few clauses to look out for. A number of suppliers charge exit or cancellation penalties that make it harder for customers to switch out of their fixed rate tariffs if or when better deals become available.
Lyon said: “While some carry exit penalties, EDF Energy’s Blue + Price Promise and ScottishPower’s Online Fixed Price Energy April 2014 both guarantee your prices for the next two winters, but don’t charge an exit fee.”
The ScottishPower deal is the cheapest on the market that doesn’t have an exit fee. Where they do apply, exit penalties range between £30 and £75, enough in many cases to wipe out the savings potentially achieved from moving to a cheaper deal.
If you do go for peace of mind by taking a fixed rate, keep an eye on the expiry date because you’re likely to be dumped onto a far more expensive standard tariff once the deal comes to an end.
A number of fixed rate tariffs expired at the end of September and households who failed to act may find themselves paying up to 30 per cent more as a result, said theenergyshop.com.
The lowest rates on the market are variable contracts, however. While they give the option to easily switch if something better comes up, they also leave you exposed to further price hikes.
The cheapest variable tariff is around £300 lower on average than the most expensive. The biggest savings are on offer to households on standard tariffs paying by receipt of a quarterly bill and prepared to move to an online tariff paid by direct debit. Websites including uSwitch.com, moneysupermarket.com, energyhelpline.com and the energyshop.com allow comparison of tariffs based on your postcode and energy usage.
“Whichever you opt for, it’s important to act without delay,” said Lyon. “If you just sit back and watch your energy prices rocket, you could miss out on significant savings.”
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Thursday 23 May 2013
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