Smart Money: Dig yourself out of a big bill with a new energy deal

SCOTS staring down the barrel of what could be another very cold winter are being urged to do all they can to keep their fuel bills down.

The government last week held a “summit” with suppliers to tackle rising energy prices, but any hopes that companies had been persuaded to reduce prices were quickly extinguished. Instead it was made clear that the responsibility to cut bills remains with consumers.

Prices have risen sharply this year, with a summer round of increases of between 15 and 20 per cent that added another £100 to the average bill. And while Npower and Scottish Gas have said they won’t raise tariffs again this year, and SSE has pledged to freeze prices until at least next August, price cuts are unlikely even after a recent fall in wholesale costs.

That means energy bills are set to reach new record highs over the coming months, driving more Scots into financial hardship at a time of rising unemployment, wage stagnation, inflation and government spending cuts.

More than seven in ten households say they will have to use their savings, credit cards or overdraft to pay their energy bills this winter, according to research by Moneysupermarket.com. One in three Scottish households is already in fuel poverty – meaning they are spending more than 10 per cent of their income heating their home – and their number will swell over the coming months.

Yet many admit they have taken no steps to reduce their bills, said Trisha McAuley, deputy director of Consumer Focus Scotland. She said: “Many people simply don’t think there is much point changing tariff, payment method or supplier. But they could be losing out on hundreds of pounds a year because their home leaks heat or they’re missing out on a better deal.”

Pressure is growing on suppliers to make it easier for households to take those steps. With about 400 tariffs on the market, and with energy firms accused of doing too little to encourage people to sign up for their best deals, the odds remain stacked against households.

But until things improve, the onus is on consumers to do what they can to cut costs. Here are the main options to explore:

Can you pay another way?

The difference between the cheapest online tariff, where bills are paid by direct debit, and the standard tariff paid every quarter is around £300, yet more than half of households are still on the latter, according to Moneysupermarket.com.

If you’re on a standard deal you don’t even need to change company to save money. The average standard bill is now £1,287 a year, £237 more than the cheapest online deal available.

The cheapest online rate broke through the £1,000 barrier for the first time earlier this month, but there are still good deals available. The cheapest online tariff is the Npower Sign Online 24 deal, at £1,050 a year, based on medium energy usage.

Can you get a better deal elsewhere?

Switching energy supplier should be easy – but it can also be fiendishly complicated. All of the big six suppliers have so many different tariffs that not even they always know which are the cheapest.

An investigation by consumer group Which? recently found that suppliers are too often failing to offer customers their best deals. In a “mystery shopping” exercise in which researchers asked firms for details of their cheapest tariff, the six big suppliers fell short in a third of calls.

Yet in many cases switching remains the most effective way of slashing energy bills, particularly if you’ve never changed supplier before or have not done so for some time.

Scott Byrom, energy manager at Moneysupermarket.com, said: “Finding the right tariff for your consumption level and region means bill payers could save on average £237 per year.”

There are also fixed deals with which households can protect themselves against further increases. For example, EDF Energy has a Fix for 2012 tariff at £1,050, available until 31 December.

First make sure you’re not tied into an existing fixed deal, then go online to find the cheapest tariffs available to you. Websites including Confused.com, Moneysupermarket.com and Energyhelpline.com (which also has a helpline on 0800 074 0745) are among several that allow you to compare providers, based on your current usage and how much you pay.

Are you claiming all the help you’re entitled to?

While the government was making a play of meeting with energy suppliers last week to discuss rising energy bills, pensioner campaign groups pointed out that winter fuel payments for people over 80 are being cut by £100 – the amount by which average energy bills rose over the summer.

The winter fuel payment is being slashed from £400 to £300 for over-80s, while payments for pensioners under 80 are being cut from £250 to £200.

As Ros Altmann of Saga pointed out, these age groups are the least likely to be able to find the cheapest deals.

She said: “The most vulnerable older people, the silent sufferers who are not on the internet, will be denied the best rates. Inflation has been soaring, older pensioners are often already in fuel poverty and yet their winter fuel payments are being cut.”

Over-60s on low incomes and/or eligible for means-tested benefits could also apply for social energy tariffs. These are cheaper rates offered by suppliers, although shopping around is still important as your supplier’s best deal may not be the cheapest available to you.

Can you cut your household’s energy usage?

This could be the most effective measure over the long term, depending on how old and energy efficient your home is.

The big six suppliers all offer free or discounted deals on loft insulation and cavity wall insulation, which help keep heat in your home and can save you up to £100 a year on bills. However, you have to inquire directly as firms aren’t exactly shouting from the rooftops about it.

You may also qualify for the Scottish Government’s energy assistance package, which has grants for boiler replacement and home insulation. Contact Energy Saving Trust Scotland for free advice on cutting energy consumption (0800 512 012 or www.energysavingtrust.org.uk).

Other basic energy efficiency steps you can take include turning down your central heating thermostat, installing double glazing and using energy efficient light bulbs, all of which can give useful savings over time.

Are you overpaying?

Millions of households have paid the price for suppliers relying on inaccurate estimates. Send your supplier regular meter readings and make a complaint if it sends what you think are incorrect bills. If you have sent the most up-to-date figures there is no excuse for it not to use them.

If you complain and it doesn’t resolve the issue within eight weeks, take the matter to the Energy Ombudsman. Call 0330 440 1624 or 01925 530263, or visit www.ombudsman-services.org/energy.html for details.

6 Is it time to go smart?

One way of making sure your supplier doesn’t rely on estimates is to switch to a smart meter. It won’t be cheaper on its own, but by recording your energy consumption it can give you the information you need to reduce your energy usage.

Smart meters record your exact energy consumption and send the information direct to your supplier, which in turn uses the details to provide an in-depth view of usage patterns. So for example, by understanding exactly how your home is heated, you can use more at off-peak times or identify how much you’re spending unnecessarily.

But while you can be sure your bills reflect your actual usage the payments aren’t smoothed out over the year, unlike direct debit tariffs, so the post-winter bills can be particularly painful.