Seize power! How to cut your energy bills by switching your supplier 

Energy customers are paying too much for their gas and electricity and should switch provider regularly, concludes watchdog the Competition and Markets Authority (CMA), in its preliminary findings from a year-long investigation into competition in the gas and electricity markets.

Here, The Mail on Sunday explains what it means for households and their quest to cut energy bills.

What is wrong with the energy markets?

Essentially, a lack of competition. The markets are dominated by the ‘Big Six’ providers, British Gas, E-On, Npower, EDF Energy, Scottish Power and SSE.

In charge: Clive Messenger uses cheaper electricity for his hybrid car

In charge: Clive Messenger uses cheaper electricity for his hybrid car

CASE STUDY: I've reduced my energy bills by moving away from the ‘Big Six’ 

When Clive Messenger moved into a newly built three-bedroom house in Cirencester three years ago he expected his energy bills to be pretty low.

But he still wanted the best deal so he switched regularly, usually between the ‘Big Six’ providers. He says: ‘I didn’t really think we were saving as much as we should.’

Seeing publicity for small supplier Ovo, which offers a range of green tariffs, Clive, 38, decided to try it out.

By moving to Ovo, Clive, head of corporate sales at a motor company, and his wife Lauren, 30, reduced their monthly energy bills from £120 to £90. He admits these bills have risen to previous levels since he changed his car to a hybrid electric Mitsubishi Outlander, which he plugs in to charge at home.

But this increase is offset by significant savings on petrol.

He says: ‘For no more than £1 I can commute the five miles to work and back and do some other local driving.’

Clive adds: ‘I am always wanting to be more green, but like most people, not willing to pay extra for it. With Ovo I manage to be more green and also save money.’

These companies inherited armies of customers nearly two decades ago in the wake of privatisation of the gas and electricity industries, many of whom have never subsequently switched.

Millions of loyal customers, often the less well off or elderly, are stuck on expensive standard tariffs even though discounted deals are often available from their current supplier.

The CMA says the ‘Big Six’ overcharged customers by £1.2billion a year between 2009 and 2013.

Why don’t households switch their supplier?

Households typically pay £1,200 a year for energy and although they could save £160 a year by transferring to a dual fuel deal, one in three have never switched.

More than two thirds of customers are sitting on a supplier’s ‘default’ standard variable tariff.

The CMA review attributed apathy by energy users over switching to poor awareness of the better energy deals, confusing and inaccurate bills and the hassle of changing supplier.

Companies take advantage of this apathy by charging loyal customers higher prices.

Will the review prompt change?

Possibly. It suggests measures to turn ‘sticky’ customers into non-sticky ones. It also wants smart meters promoted more heavily.

More than a million smart meters have been installed so far in British homes. These send automatic readings to suppliers and, in theory at least, bring an end to households overpaying because of inflated estimated bills.

It is hoped these will also help prepaid meter customers who pay over the odds for their energy.

The authority is also investigating whether households might switch more willingly if they are tipped off by text or email about good deals or given regular updates on the number of fellow customers who switch.

Will gas and electricity prices be capped?

The CMA says previous measures designed to improve the lot of customers, including the ‘four tariff rule’, are not working. This shrank the baffling range of tariffs to a maximum of four offered by each supplier – but appears to have restricted competition.

Instead, a temporary prices cap is being considered to protect the majority on variable rates.

Dale Vince, founder of the small provider Ecotricity, says: ‘Customers on a standard tariff would be moved to a regulated tariff to protect them from being overcharged.’

The report suggests comparison websites could have a role in stimulating competition by negotiating their own cheaper deals directly with providers.

Could the report’s findings have been stronger?

Yes. Mark Todd of comparison website energyhelpline, says the report is a ‘positive step forward to fixing the market’. But he adds: ‘We believe they should ban the hoarding of customers’ direct debit cash when they have given meter readings and speed up and make switching more reliable.’

The Big Six are thought to be sitting on £2billion of customers’ cash from overpaid direct debits.

So what should we do to reduce bills?

Any final recommendations to improve the energy markets will not be made until December –but households can start saving on energy costs now.

To see if switching is worthwhile, find a recent bill showing energy usage and then ask your current supplier for a list of its best deals – or find another using an accredited comparison website. These websites are listed at goenergyshopping.co.uk. For example, energyhelpline says £422 can be saved on a typical £1,292 annual bill by picking the best variable tariff from GB Energy Supply, or £380 with extraenergy’s Fresh Fixed price November 2016v1 deal.

To switch, tell the new supplier and it will do the rest.

Then, every few months check the new deal is still value for money. Technology is already helping to reduce hassle.

From this month providers must include a ‘quick response’ bar code on all bills, which contains a customer’s tariff and consumption record.

The website comparethemarket has recently updated its ‘Snapt’ app to allow customers to use their smartphones to scan this code and then automatically feed the data into its comparison engine, allowing them to compare tariffs in seconds.

THE BIG SWITCH: COULD YOU SAVE MONEY ON YOUR BILLS?

This is Money has joined forces once more with energyhelpline to launch a new collective switch to help readers save money on energy bills. 

The winning tariff has now been revealed - it is offered by E.on and costs just £885. 

It is the cheapest short fix in the open market and, compared to the average annual bill of £1292, saves households a hefty £407.

You can still register to lock down this one-off price until July 24.

The Energy Switch allows our readers to team up with thousands of other people and use their collective power to negotiate a unique offer on their energy bills.

This special deal turns the table on energy firms - rather than households having to hunt out a better price, they will be competing to offer you one.

If you decide to switch and save money you can. If you decide it is not for you then you do not have to take it.  

  • Not interested in taking part but want to search for a better deal? For full details of how to switch your provider and where to find the best deals check out This is Money's switching guide

 

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