Energy bills: Could you cut your fuel costs by switching to the best deals?

By Amy Andrew and Emma Gunn Updated: 03:24 EST, 15 July 2015


Households are making even bigger savings thanks to smaller energy suppliers that have rocked the market and forced increasingly competitive deals.

Falling wholesale prices are finally filtering through for customers and even the Big Six have started cutting their tariffs.

So there has never been a better time to switch to a new provider and save money on fuel bills.

The average annual saving made by customers switching energy tariffs has risen to £228 – up from £138 in May 2012 and £170 in May 2011, according to figures from comparison service uSwitch.com.

Bills: If you've never switched supplier then you could save a substantial amount by moving to a different firm.

Bills: If you've never switched supplier then you could save a substantial amount by moving to a different firm.

Figures from Energy UK reveal that 1.3 million customers moved from a large supplier to a small one during the past 12 months - the equivalent to 41 per cent of all switches.

This has forced the hands of the largest big six suppliers, which have all recently launched new tariffs in response to cut-price deals from smaller rivals.

Potential savings for households are now huge - some can shave off more than £400 a year from their bills - particularly for those that have never switched before.

And you might be surprised by how simple the switching process can actually be.

Those on the hunt for a better deal have heaps of choice whether it is a long-term fix, variable rate or tariff from a smaller or green supplier you are looking for, with tariffs cut to under £1,000 in the run up to the new year.

Although the savings from switching are not quite as big as they were a few years ago switching should remain a key part of your personal finance maintenance.

If you are one of the millions of people who have NEVER switched (i.e. stuck with your original supplier), then you could also save a big chunk of cash.

If you want to cut straight to comparison, you can compare energy tariffs, with the choice of entering your own energy use, using our energy price comparison tool - click here

Latest energy news

Arming yourself with as much information as possible will help you to save money on your bills:

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  • Ofgem orders Big Six suppliers to give money back to customers with dormant accounts, but energy giants cling on to £400m from overpaid bills. Read more
  • Households will be able to switch energy supplier in just 17 days as regulator cuts switching time in half. Read more

Things to remember

The average Big Six standard tariff bill is at an eye-watering £1,265 compared to £472 ten years ago.

In comparison, many small providers now offer fixed tariffs that will give you average annual bills below £1,000. 

Your bill will show two costs - a fixed standing rate charge and the price per unit (or Kwh of energy used).

Online plans paid by direct debit are still the most competitively priced and if you have never switched, choosing one of these will save you the most money.

You can either opt for a variable rate tariff, where the price can go up or down or a fixed rate tariff which gives you a secure price on each unit of electricity you use for a set period.

Historically variable rate tariffs have tended to be cheaper. But at the moment the cheapest rates are currently offered on one-year fixes and all of the Big Six have pledged to freeze even their variable rates until 2015.

However you will still pay a premium if you want long-term price security.

But, some may still find that they save money switching to a fixed tariff, particularly if you've never switched and are not signed up to a duel fuel and paying by direct debit.

SAVINGS: TRICKS AND TRAPS

1) Regular meter readings. Make sure you check every time you receive a bill, rather than relying on an estimate by your energy provider's estimate.

2) Change to online bills. You could save up to 10%.

3) Avoid prepayment meters if you can, and swap to a billed meter. Even if you have to pay to get one, it's probably worth it for the savings you'll gain.

4) If you're in financial trouble some companies offer special deals, which help ease any difficulties you might be facing. But don't just assume this will be the cheapest option - make sure you still do your homework.

5) Dual fuel (gas and electricity from the same supplier) is not always the cheapest option.

6) Monthly direct debit payments could save you 5-10% as companies are more confident that customers won't default and earn interest on any overpayments. Check any extra payments are refunded at the end of the year.

Should you fix?

Tariffs of this type will fix the rate you pay for a period, typically 18 months - but you can fix for as long as four years at the moment.

You will usually pay slightly more than the cheapest deals to buy long-term security, and be careful as some do come with exit fees if you do want to leave early.

There is no guarantee fixing will be best for the long-term but it gives certainty over bills as household finances are squeezed.

Remember: This doesn't mean you will simply pay a fixed amount. Your bill will still depend on the amount of energy used - you just pay a certain amount per unit.

Price comparison services, like the one here at This is Money, allow you to specify which type of tariff you want.

Would you be better off ditching the Big Six?

Anger towards the Big Six energy suppliers who make up 90 per cent of the energy market over mid-winter price hikes and bad customer service, has understandably encouraged many households to consider a smaller provider.

Although the larger companies dominate the energy market some of the smaller providers actually offer cheaper deals.

Over recent months small providers such as First Utility, Ovo Energy and Spark Energy have been dominating the best buys tables.

Ovo Energy has recently grabbed headlines by becoming the first provider to offer a tariff costing the average household less than £1,000 a year.

In a recent Which? survey small suppliers Good Energy and Ecotricity topped the tables for the best service with an impressive 82 per cent score, closely followed by the likes of Utility Warehouse, Ebico and Ovo Energy.

The Big Six however only averaged a satisfaction rating of 40 per cent.

Who is cheapest?

uSwitch.com has supplied an up-to-date cheapest fixed tariff best-buy table (below), which lays out the top plans for customers paying by direct debit in arrears.

Bill sizes are based on the average medium user - remember the cheapest tariffs can be variable rates, leaving you open to price increases. But fixed deals currently dominate the best buys, and you could get an average bill below £1,000.

BEST BUY ENERGY TARIFFS
Supplier Plan name Average bill size Tariff type
GB Energy Supply Premium Energy Saver £870 Variable
SSE SSE 1 Year Fixed £899 Fixed
Extra Energy Fresh Fixed Price Nov 2016 v1 £912 Fixed
Flow Connect £914 Fixed
GnERGY GnERGY Fixed June 2016 v1 £915 Fixed
First:Utility iSave Fixed August 2016 £917 Fixed
Green Star Energy Rate Saver 12 Month Fixed 2507 £920 Fixed
Sainsbury's Energy Fixed Price July 2016 £930 Fixed
OVO Energy Better Energy (all Online) £933 Fixed
Co-op Fair & Square May 2016 £944 Fixed
 Source: uSwitch.com, correct on 15th July 2015   

Energy switching: The background

Suppliers tend to charge more for electricity to those customers who live in their 'home' region - the areas where they enjoyed a monopoly before energy deregulation. So switching away will almost always save you money.

Prices are different all over the country and the cheapest supplier for you will depend where you live. You only need to be interested in the tariff that is going to be cheapest where you live, so do your own comparison to find the best price.

However, although some tariffs incur cancellation penalties if you leave before the term expires, it may still make sense to switch now and accept the penalty if it is small and your potential savings are big.

How to switch your gas and electricity

The simplest and often best way to switch energy bills is to use an online service, which can compare the tariffs on offer for you.

One way of doing that to find the cheapest energy supplier for you is by using This is Money's fuel bills switching service, powered by Energy Helpline.

We have chosen Energy Helpline as our partner because they are a long-standing, well respected firm with evidence to show that they can get our readers the best deal.*

The service shows you the tariffs available and how much you could save by switching to each one, it allows you to choose what suits you and can rank suppliers by customer service and price.

Switching is quick and easy and can be done online. All you need to do is put your postcode into the box to the right and follow the simple steps. The service is free to use and in a few minutes can tell you whether you can save hundreds of pounds.

There's no need to fill out any paperwork or sign a new contract - it does the hard work for you.

READ THE NEXT BILLS GUIDE

  • Sorted your energy bills? The next step is making sure you are not overpaying for your broadband, TV and phone contract. Skip to the next bills guide to find out how to make sure you are getting the best deal

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