Clare's consumer finance advice

Every week Clare Francis, financial journalist and editor of comparison site moneysupermarket.com will offer tips and advice on all things money-related to help iVillagers make the most of their hard-earned cash. From energy bills to car insurance; credit cards to children’s savings accounts; mortgages to discount vouchers Clare will show you how to make sure you’re getting the best deal

Are your energy bills about to soar?

By Clare Francis on 12 Jul 2011 No comments

With the headlines having been dominated by the News of the World phone-hacking scandal, you may have missed British Gas’ announcement last Friday that it is hiking its prices.

From August, 18 British Gas is increasing gas prices by 18% and electricity by 16%, which will add almost £200 to the average annual bill. And as the country’s largest energy provider, this will affect around nine million households.

Scottish Power was the first of the major energy providers to announce price increases (its charges rise on 1 August) and now British Gas has moved too, the house of cards will fall and it’s just a matter of time before the other big energy firms follow suit.

Hopefully many of you will already be in the process of switching your energy tariff, having acted following Scottish Power’s decision to increase prices. If you haven’t then it’s well worth applying for a new deal now.

Why prices will keep rising

Unfortunately, the only direction energy costs seem to be going in is upwards. This is partly due to increases in wholesale prices but there are other forces at work as well, meaning we’re unlikely to see falls. Most notable is the fact that energy providers are investing in sources of renewable power such as wind farms and customers have to pay towards this investment. Therefore, the advice is to lock into a fixed rate tariff now to protect against further price increases – at least for a year or two.

British Gas customers paying its standard prices will see their gas and electricity bill soar to an average of £1,286 a year when the increase takes effect next month, and Scottish Power’s 3.4million customers will be paying average annual bills of £1,391. But, if you lock in to EDF Energy’s Fix Saver version 2 you can bring the cost of your gas and electricity down to an average £1,009 and be protected in case we see further price hikes over the next 12 months.

Switching is easy

Around 15million households have never switched their energy provider but it really is simple. I switch every 12 months or so and have just moved from E.ON to EDF Energy because my old fixed rate deal ended on 1 July.

It took less than five minutes to find the best tariff and apply using moneysupermarket's energy calculator. I did that about 4 weeks ago and the transfer completed last week. I haven't had to do anything other than supply my bank details to set up a direct debit, create an online account with EDF and provide meter readings. Everything else has been handled by EDF and E.ON.

Things to note before you switch:

While EDF Energy currently has the cheapest fixed tariff on average, it won’t necessarily be the best value for all households: this will depend on where you live and the amount of energy you use. Therefore it’s well worth using a comparison site to identify which is the best deal for you.
Act quickly to fix. We’ve seen a huge surge in the number of people switching their energy provider over recent weeks and fixed deals are unsurprisingly the most popular. However, due to the huge demand the current crop of fixed deals won’t be around for much longer and when they are pulled, they’ll be replaced by more expensive tariffs.
Be careful if you opt for an online discounted deal. If you use a compare energy deals you’ll notice that the ‘cheapest’ options are online discounted tariffs. However, bear in mind that none of the prices displayed will reflect price increases. Therefore if you sign up now, you will almost certainly see your bills rise in the coming months. This is another reason why experts are recommending fixed rate deals at the moment.