The nation’s largest energy supplier, British Gas, has hiked its gas and electricity prices by 15%, pushing its average energy bills back beyond the £1,000 mark.
It is the third provider to heap more energy misery on its customers in the space of just two weeks - Npower and EDF hiked the price of its gas and electricity products by as much as 17.2% - and analysts are convinced the other half of the ‘big six’ providers will follow suit within the next six weeks.
With British Gas making a record £40 from each of its customers last year, and retail prices already at near record levels, its latest announcement is unlikely to go down well with customers, says Mark Todd of comparison site Energyhelpline.
“It seems unjust that 17 million British Gas customers are expected to suffer above-inflation price rises when the wholesale markets are still 20% lower than the last set of price hikes in 2006, and the company is about to announce bumper profits.”
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Are UK customers getting fleeced?
And its not just British Gas customers who feel they are getting a raw deal, adds Allan Asher, CEO of energy watchdog Energywatch.
“Suppliers are pointing to soaring wholesale and distribution costs. And while the prices have gone up, consumers well remember that the causes of spiralling consumer prices are a wholesale market that punishes British consumers and a supply market that seems unconstrained by competition from passing these costs on to the consumers.”
The claim that UK customers are given a hard time is further reinforced by market analyst Energy Advice, which pointed out that the UK was facing hikes up to three times higher than many of its Western European neighbours.
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So why is our gas so pricey?
The reason why the UK pays so much more for an identical product is two fold: The first (and least surprising) is tax.
When Chancellor Alistair Darling attempted to garner some positive PR earlier this month by asking the energy powerhouses to justify the recent price hikes, they responded by pointing out that it was in fact the government’s own green tax initiatives which were largely to blame, adding nearly £30 to every household’s energy bill.
The second reason is that suppliers are allowed the flexibility to set higher retail prices because the UK has a deregulated market, unlike most other European nations. Of course most of the local suppliers are owned by companies on the continent, so the UK then becomes something of a cash cow for them.
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And the icing on the cake...
As if things weren’t bad enough, you could end up paying substantially more than the national average, based on where you live.
This is because energy suppliers want to start billing us based on how far we live from coastal gas terminals. Npower is the first supplier to do so, but it is widely expected the other providers will suit. And the differences can be astounding - Npower hiked gas prices by 17.2% on average, but households in London and the East Midlands could see rises of up to 24%.
Against this backdrop of sky-high energy prices and postcode lotteries, many consumers are looking at how they can cut their monthly bills.
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Time to cut your bills
The best place to start is by switching energy providers. Because you can do it all online, it’s actually a fairly simple process - as witnessed by the fact that 2.8 million households switched in the first seven months of last year.
The problem here of course is that Scottish & Southern Energy, E.On and Scottish Power have yet to hike their prices, so they may only be cheaper in the very short term.
This leaves customers with two options: Wait until mid-February switching, or opt for a capped price deal. With these, you are guaranteed that energy prices won’t rise above the level at which you signed up, but they will fall if prices drop below that threshold. The catch is you are forced to pay a premium on top of the standard rate.
E.On, for Example, charges roughly £50 a year more than its standard tariff. But with the supplier expected to announce hikes in the region of 15% soon, it could well be an astute move.
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May not need to switch
Did you know you can actually save even more than switching simply by changing to your current provider’s cheapest deal? This will almost always be their online tariffs, which work out up to £100 cheaper than standard plans.
Another way to keep your bills low is paying by monthly direct debit, as companies charge more to anyone who doesn't do this. Finally, you may be surprised to learn the opting for the dual fuel option isn't always the cheapest.
Logic states that suppliers would offer the best discounts to customers who were paying them for both gas and electricity, but recent research suggests that choosing the cheapest standalone tariffs could save you money.
The difference between dual fuel and standalone costs can be marginal - some £20 or so - but that shouldn't be a reason not to look into whether you can save money.
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