Industry insiders are warning that energy prices could rise as much as 40% this year, pushing the average household’s bill to almost £1,500.
Price comparison site uSwitch says that such a hike will plunge an extra 1.6 million into fuel poverty, taking the total to 6.1 million - a 36% increase. Worse, if current wholesale gas trading prices continue at £1 per therm, we will likely see a further 10% to 15% hike in bills during the first half of 2009.
"The days of cheap energy are over,” warns uSwitch consumer policy director Ann Robinson. “If average energy bills do hit £1,467 by the end of 2008, spending on energy will account for 5% of the average household's net income.”
"This is going to cause huge financial pressure.”
Act now to cut the prices
What makes these predictions all the more frightful is the fact that energy is just one of many monthly costs that are skyrocketing. From petrol, to food, to mortgages, our household budgets are being assaulted from all angles.
That means it’s going to prove extremely difficult for many households to free up extra cash to meet their rising energy bills. So what to do? Your best bet is to be proactive in whittling down your energy bills now in order to counteract as much of the rises ahead as possible.
This needn’t be difficult to achieve.
Virtual bills are smaller
The easiest, yet most effective, way to trim your energy bills is to switch to an online tariff and pay by direct debit. Do this and you could reduce your costs by as much as 22%, or £187, as the table below shows.
Standard versus online: Average annual costs calculated over a 12 month period
| January | February | April | May |
| Standard Plan | £937 | £1,026 | £1,048 | £1,048 |
| Online Plan | £796 | £839 | £861 | £883 |
| Saving | £141 | £187 | £187 | £165 |
Another option you may want to consider is the fixed or capped plan. As the name implies, you pay a premium in return for the assurance that your bills won’t rise above a certain level.
The problem with such deals in the past has been the fact that the premium was so exorbitant – as much as £200 – that they made little financial sense. So are they a good idea now?
Well, that depends on two highly variable factors: How much of a premium your supplier will charge you, and how much gas prices will actually rise - keep in mind that uSwitch’s prediction of a 40% rise is a worst case scenario.
If there is absolutely no way you’d be able to afford it if prices did rise by that amount, then you should seriously consider a capped deal. For everyone else it’s a matter of choice. Call me an optimist, but I’m sticking to my basic online tariff.
Use less around the house
Another way to trim energy bills is quite straightforward, really: Use less of the stuff. These tips are common knowledge, yet most of us fail to follow them (myself included, although that may change when I get my first sky-high bill).
Switch off appliances: The average household also wastes £37 each year by leaving appliances like phone chargers, TVs and DVD players on standby. According to the Energy savings trust, we could save enough electricity to power 2.7 million homes a year if we avoided standby.
Energy saving light bulbs: Energy saving light bulbs last up to 12 times longer and use up to 75% less energy, saving you £78 over their lifetime.
Turn down your thermostat: More for the winter, this one, but a handy tip nonetheless. You won’t notice the difference but, reducing the temperature by one degree could shave £30 off your bills. You’re also emitting less CO2, so you can bag yourself a few green points in the process.
Green Feng shui: Another winter tip. Keep furniture away from radiators as the foam in upholstered chairs and sofas absorb a lot of the heat.
