Savings available from tariff or supplier switching are currently at an all-time high. On average, UK households are paying £1,066 a year for their gas and electricity, yet the cheapest deal is currently £745, meaning many are missing out on savings of up to £321 a year.
Wholesale prices of gas and electricity have been dropping dramatically since 2014, and are still falling now. Wholesale electricity prices today are down 34 per cent since 2014, and gas is down 51 per cent. Despite this, the Big Six energy suppliers only cut their tariffs by around five per cent earlier this year, pushing more and more customers to look to the smaller energy suppliers for a better energy deal.
Whether you are with one of the Big Six or a smaller supplier, making sure you are on the right tariff for your needs can lead to significant savings on your bill. Recent investigations by the UK’s Competition and Markets Authority (CMA) has discovered that households on standard tariffs are paying around £330 a year more than those who have taken a new, great value deal. Here’s what you need to know about checking you’re on the right tariff and asking your supplier to switch.
What types of tariffs are there?
There used to be so many tariffs out there it was almost impossible to know whether you were on a good one or not. But from January 2014, as part of the energy market reforms, OFGEM instructed all suppliers to restrict their offerings to just four simple tariffs. This was designed to make it easier to compare tariffs, and to see which would offer the best savings for you.
As a result, there are less tariffs available, and it’s a little easier to understand what each one offers:
Also known as the ‘evergreen’ tariff, this is the bad boy of expensive tariffs, the one you should always avoid being stuck on. It’s the ‘default’ tariff offered by all suppliers, the tariff you’ll be put onto if you’ve been on a deal which has come to an end. It has no exit fees but is usually an expensive option, and could increase or decrease at any time.
A fixed tariff offers guaranteed unit rates and standing charges until the end date of your contract. It’s good for giving you peace of mind that your energy price will not change, but also means you could miss out on price cuts later down the line. You may also be faced with high exit fees if you want to switch before the end of your contract.
If you are supplied with both gas and electricity from the same supplier, you can benefit from a duel fuel tariff. This tariff often comes with a significant discount annually, but it’s still important to make sure this discount outweighs the potential savings available by choosing two separate suppliers.
Choosing a green energy tariff means your supplier will either put some money towards environmentally beneficial schemes on your behalf or will match your energy usage to renewably generated sources. You can only get a green tariff for electricity use, and in some cases these tariffs will be more expensive than others, so shop around.
Economy 7 or 10
Economy 7 and 10 tariffs give you cheaper energy at certain times of the day, when demand on the National Grid is lowest, such as overnight. If you heat your home using storage heaters, these tariffs can be useful for charging up your heaters in the night. Not all suppliers offer these tariffs, and those that do don’t always offer them to new customers.
If you have a ‘key meter’ or need to top up a card in order to pay for your electricity, you are on a pre-payment tariff. Historically these have always been the most expensive way of paying for energy, and it has been expensive to change to a credit meter. However, some suppliers are no longer charging you to switch, and you could save almost £400 a year if you’re ready to move to a credit meter.
There may be other discounts and bonuses available to you, depending on the supplier. Some cashback websites give you a fixed amount for switching through them, and some suppliers offer discounts if you pay by direct debit. If you are internet savvy, you can also choose to manage your account online with paperless billing, which can open up more options for cheap energy tariffs too.
Do you need to switch supplier?
With the UK experiencing something of a switching push right now, you might think that the only way to save is to leave your current supplier. However, this is not always the case, and if you prefer to remain with the company you are currently with, you could still save money.
Even if you are receiving the same gas, the same electricity, from the same company, you could still be charged several hundred pounds more just for not requesting a cheaper tariff. EDF have a price variation of almost £200 between their cheapest and most expensive tariff, and Npower almost £300. As an added bonus, if you switch internally, most providers do not charge any exit fees.
If you’re paying more than around £800 a year for your gas and electricity, chances are you could save by switching to a better tariff, even if you don’t want to move supplier. Don’t wait, because every month you’re overpaying for your basic energy needs.