Fixed price energy customers: this is a wealth warning!
If you opted for an energy tariff with a fixed price that expires in 2010, you need to review your options today - before you get stuck paying way more than necessary.
During the energy price surge of 2008, many households switched to a 'capped' tariff to protect against increases of 30-40% in gas prices. Now, as those caps come to an end, you face two different ways to get stung in the wallet:
- Getting automatically moved to another capped tariff - with a 'get out' fee of up to £70
- Seeing your prices soar when you get your next bill.
It's time to act: check when your current energy tariff expires, make sure you don't get sucked in to another one, and get ready to switch.
Mainstream energy prices are currently a rip-off…
This probably confirms your suspicions anyway: you are being charged far too much for your household energy supply.
When fixed price tariffs were all the rage in 2006-2008, that's because energy prices were climbing at a steady and sometimes alarming rate.
This winter, however, wholesale prices (i.e. what your supplier has to pay for gas and electricity before distributing it to you) have dropped considerably. Take gas, for example: the wholesale price dropped to below 40p per therm at the end of 2009, compared to more than 100p per therm during summer 2008.
However, instead of passing the reduced prices on to you, suppliers have taken the opportunity to raise margins instead. The effect of this can be seen in the results gleefully published to their shareholders last week — for example:
- Centrica, the owner of British Gas, reported approximately a 50 per cent increase in 2009 profits to £550 million
- Scottish Power, owned by the Spanish energy giant Iberdrola, announced an 8 per cent rise in profits to £1.3 billion last year, despite shedding more than 100,000 customers in the UK
Let this be a motivation to act.
New fixed-price tariffs could be two kinds of rip-off…
If your energy company sends you a letter saying they are rolling you over to a new fixed-price tariff, consider that an alarm bell.
The cost of energy is currently falling — so fixed-price tariffs are not a good idea for money saving at the moment.
Energy companies know this, so they may not be likely to tell you openly. First, they are allowed to notify you of price rises up to 65 days after they occur (this unfair rule might change soon, but for now it still stands). Second, thousands of British Gas customers have complained that the notification letter looks like junk post: many threw it away.
Another reason to avoid getting 'rolled over': many of these new capped tariffs have exit fees. If you want to switch, you'll be liable to pay up to £35 per fuel (£70 total).
This is another good reason why not acting today could cost you money.
Sticking with your regional electricity company is a rip-off…
Despite a decade of savings to be made through energy switching, it's estimated 33% of domestic electricity customers remain "faithful" to their home supplier.
If only they were that faithful to you. Energy companies charge more to loyal customers in their host regions than they do to customers elsewhere in the UK.
For example, nPower charges customers in Yorkshire 12% more than their average price across other regions, amounting to an extra £48 a year.
If this practice shocks you or seems unfair, that's because it really is time to compare and change suppliers.
What can you do about the 2010 energy price rip-off?
There's only one thing you really can do — but thankfully it's effective if enough people do it…
You have to switch.
Switching supplier makes no difference to your actual electricity and gas supply, just the billing and the prices. It's a simple exercise in market freedom.
- switch providers today and save up to £500 (based on Money Hospital readers' own results)
There is a price war out there, so lower prices are a realistic possibility. But with the "Big 6" energy companies dominating the advertising, you might have to look a little further than British Gas, nPower or E.ON for competitive tariffs.
Use our seven steps for avoiding the 2010 energy price rip-off:
- Open all letters from your energy supplier. If tariffs and prices are mentioned, pay close attention.
- If you're on a fixed price tariff, find out when it ends (so you know when to act, if not right away)
- …and find out what prices you'll pay when it ends (so you can do an accurate comparison)
- Calculate how much you could save by switching supplier - using your upcoming price, not the previous fixed one.
- Consider electricity and gas separately (if necessary, calculate again)
- Do it today!
- Don't delay!
- use our energy calculator to switch and save