Happy New Year from Npower - bills rise 5%

Npower finally delivered the blow that millions of households were braced for yesterday when it revealed that its energy bills would go up next month. Both its electricity and gas prices will rise by 5 per cent on 4 January, a move that will affect more than 6.2 million homeowners.

The news followed price hikes in recent weeks by Scottish Power, Scottish & Southern Energy and Scottish Gas, with the latter's 7 per cent increase taking effect yesterday.

With EDF pledging to freeze its prices over the winter months, all eyes were on Npower and E.on before the former showed its hand.

The average household on a dual fuel tariff with Npower will see their annual bill jump from 1,196 to 1,261, according to uSwitch.com, which said the supplier has reduced its prices by just 7 per cent since increasing them by 42 per cent in 2008.

Trisha McAuley, deputy director at Consumer Focus Scotland, said: "With four of the Big Six suppliers having now announced price rises averaging 6 per cent, the focus on (energy regulator] Ofgem's review of whether energy prices are justified will be even sharper.

"Consumers should seize this opportunity to check they are getting the best deal on their energy and, if necessary, switch. Even changing the tariff or payment method with an existing supplier can result in big savings."

The Npower increase emerged as a report found that half of households claim they will use less energy this winter because of the latest price rises.

Research by Consumerintelligence.com revealed that 52 per cent plan to use less gas and 53 per cent will use less electricity over the coming months in a bid to keep their bills down.

Just 14 per cent say they will change provider because of the recent price increases. Yet Consumer Focus Scotland recently published research showing that almost half of all Scots are missing out on the savings on offer from switching to a better deal, with about a million Scottish households in a position to save 100 a year on average by transferring to a cheaper tariff.

The biggest savings are made by switching from a standard tariff paid on receipt of a quarterly bill to an online deal paid monthly by direct debit. However the cheapest online deal disappeared this week when EDF Energy withdrew its Online Saver V7 tariff.

The move took the average cost of the best available tariffs above the 1,000 threshold for the first time since September 2009, according to Scott Byrom, energy manager at Moneysupermarket.com.

"For those who don't want to be locked into a fixed deal, Npower's Sign Online 20 tariff has average annual bills of 952 and is the cheapest deal on the market," said Byrom.

"For those sat on expensive standard tariffs it really does pay to switch, with households saving almost 200 a year by swapping to the best online dual fuel deal available at the moment."