Energy bills are at a record high, yet the vast majority of British households are still needlessly paying more than they need to by languishing on their supplier’s standard tariff.
Since the proliferation of price comparison sites, millions of people have been switching to a competitor in order to secure a better deal. But lately suppliers have tended to price their deals similarly.
The result is that the best way to save money is not necessarily by switching suppliers, but switching tariffs instead.
Three tariffs, only one is a rip off
There are generally three different types of deal you can sign up for: The online tariff, the fixed/capped tariff and the standard tariff.
With the online tariff, you get a discount of around 17% compared to the other two, which works out to a saving of around £155 a year for the average household. The only other difference is that your bill is delivered to an e-mail address instead of a postal one.
The fixed or capped account costs roughly the same as the standard tariff, but it comes with the guarantee that your bills won’t rise above a predetermined point (quite handy given the current state of the market).
As for the standard tariff; this is a truly rotten deal, regardless of which supplier you’re with. Far more expensive than the online option but with none of the security of the fix, the standard tariff offers the worst of both worlds.
Yet amazingly it is also the most popular.
Strange decision-making
According to a survey of 7,000 households, carried out by price comparison site uSwitch in December last year, almost 60% of Brits are on the standard tariff, compared to just 20% on the online deal and less than 15% on the fixed or capped option.
It's a truly baffling situation that seems unique to the household energy market. Imagine for a second that a similar situation arose in the equally expensive petrol industry. In this scenario, two new petrol companies arrive in the UK: Company A tells motorists it will undercut its competitors by 20%, while Company B promises its prices will not rise for at least a year.
Within days, the likes of Shell & BP would be able to count their entire customer base on one hand. So why is it so different for household fuel?
Inertia and a lack of knowledge
The main reason why so many people are still on the standard tariff is inertia. While millions have woken up to the importance of switching to a cheaper deal, there are many more households that simply aren’t bothered.
Another reason could be a simple lack of knowledge about the various deals available.
Thankfully the tide appears to be turning. Tired of being a cash cow for the energy giants, the number of households switching energy deals increases every year, while recent figures from uSwitch show that eight out of 10 customers who switch through them are opting for a fixed rate tariff.
This is heartening, but it still isn’t enough. At a time when energy prices are soaring and the credit crunch is wreaking havoc with finances, there really is absolutely no reason why anyone in the UK should be on a standard tariff.
