How to beat the energy firm's tariff hike and save hundreds of pounds - Martin Lewis
Yet you NEEDN’T accept the price hike – sadly, in many ways it’s a fine on customers for apathy, inertia, confusion, or complex set-ups. Instead, you can simply switch tariff. Everyone should be checking now. Many can save at least £200/year.
It’s the default deals energy firms put customers on who’ve never switched, haven’t chosen a special rate, or once that rate finishes. It’s always expensive. Yet for the last couple of years they have been governed by a price cap that’s set every six months.
A few weeks ago it was announced that from April 1 the direct debit dual-fuel price cap would rise from £1,042 to £1,138 a year for someone on typical usage. Primarily due to the wholesale rate of energy (those the firms themselves pay) have gone up rapidly after bottoming out due to low usage in the first Covid-19 wave.
In truth while it’s called a price cap it’s actually the rate for each unit of energy that’s capped. There’s no maximum energy bill you pay. If you’ve high usage you’ve a higher cap, lower usage, a lower cap.
And whilst the cap may be a ‘fair’ price, it certainly isn’t a good one. In fact, over the past few years since the price cap has been in place, it’s been on average £200/year more expensive than the cheapest tariffs on the market for switchers.
Now all the big brands – British Gas SSE, Scottish Power, Npower, Eon, EDF – respond to the price cap change, and like sheep they’ve set their new standard tariffs within £1 of it. For those on pre-pay meters the price cap is going up by 8%.
That means if you’re on one of these tariffs – which over half of UK households are – then you’ll see your bills jump.
This is the PERFECT moment to do a comparison. When the price cap rise was announced, many people flooded to comparison sites. Yet that was in some ways too early; compared then, and the savings you were shown would be against what you pay today – the rate before April – so it was likely undercalculating by over £90/yr. The small saving may have wrongly put some off switching.
Yet now all of the rate cards for big firms have been published, so comparison sites have the right details, and you can see an accurate savings figure, which should show the scale of savings available.
Many big firms do not offer their best deals direct. They ONLY allow you to sign up for the cheapest tariff via comparison sites. That way they hope to win new business from those who are looking to switch, but can keep their existing customer base on higher tariffs.
Comparison sites get paid if you can switch through them (including mine at www.cheapenergyclub.com – though if we get paid, we give you roughly half £25 as cashback which you wouldn’t get direct). Sadly, to aid profitability most sites then have a default setting which hides tariffs that don’t pay them so you don’t get a whole of market comparison (mine doesn’t, it includes all by default). There’s a list of comparison sites at www.ofgem.gov.uk.
There are also now sites that can automatically switch you each year. These tend to fall into two camps, those that charge a fee and look across the market, or those that are free but work off a very small panel of providers.
Even if you just know your existing provider’s name you should still do a comparison. Of course, it’ll be more accurate if you have your tariff details and can plug your usage in too.
Yet if you’ve not switched in years, you’re almost certainly on an expensive standard tariff.
And if you’re worried about the practicalities of switching, very little changes. It’s the same pipes, gas, meter, safety – you don’t lose supply – the only difference is price and customer service.