Here’s how to get cheapest deals on energy bills - Martyn James

Do your homework before switching energy suppliers as tempting deals may save you less than it seems (Picture: Adobe)

It might seem hard to believe, but after three long years of ludicrous energy bills, shivering through the winter and desperately trying to reduce our energy usage, bills are going down once more (though not as much as we’d initially hoped).

One of the many downsides of the cost-of-living crisis is the fact that we’ve been stuck in terrible relationships we can’t get out of… with our energy suppliers. But with the cost of energy going down, does this mean we can finally switch to another supplier to get a better deal? Here’s my guide.

Prior to the pandemic, switching energy providers used to be the best way to get a cheaper energy bill. The energy market was flooded with energy suppliers all trying to tempt customers with the best deals. However, many of those firms didn’t allow for the huge rises in wholesale energy prices and subsequently went bust when the crisis hit. That’s left us with much less choice with energy suppliers and so those remaining are much cagier when it comes to tempting deals.

However, all is not lost. It’s just been announced that energy regulator Ofgem is considering lifting its ban on offering cheaper deals to new customers as a way to get the switching market working again. It’s worth noting, though, that this is consultation, so don’t expect to see great switching deals for a while yet.

Looking at the deals out there at the moment, there are three main factors to consider. Switching deals, fixing bills with your current supplier and loyalty schemes. Unfortunately, you’ll need to do a few calculations to work out if an offer is right for you, so make sure you understand all the terms and conditions.

Start by checking out the offers on the comparison sites – but bear in mind that not all the deals available will be on each website. MoneySavingExpert have a helpful energy switching club you can use for free and information on all the latest deals.

Because energy suppliers can’t use reduced rates to tempt new customers, the offers available tend to be available to both switchers and to existing customers. However, your current supplier may be offering a better deal exclusively for its existing customers.

Switching or fixing energy deals tend to be pegged to the Energy Price Cap (EPC). This is set by the regulator Ofgem and effectively tells the energy firms the maximum average amount they can charge for each unit of energy. This is given as an annual “average” bill. The deals available at the moment attempt to undercut that maximum amount but there are catches aplenty that make comparisons difficult.

For example, you may think a deal that involves fixing your bill at 9 per cent less than the existing price cap for a year sounds good. But what if the price cap goes down again in three months? You could end up paying more. Some deals offer to continue to undercut the price cap by a certain percentage – so an energy firm might promise you will always pay 3 per cent less than the cap. But what if bills go up? Finally, there are exit fees, the price you pay for leaving a contract early. Most comparison sites include exit fees now, so do think about the cost of getting out of a bad deal.

Sadly, I don’t have a crystal ball so I can’t predict what the next year will hold for energy prices. But if you are thinking about switching or fixing your energy bill, the four essential things to consider are:

• Duration. How long is the contract?
• Discount. How much are you saving over the term of the contract?
• Volitivity. Are you tied to a deal that can go up as well as down?
• Exit fees. How much do you have to pay to leave the contract early?

In short, if you’re cautious, you might want to fix your bills for a year, but if you hold your nerve, you might get a better deal soon.

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