Energy prices Q&A: how to save money on gas and electricity
Energy suppliers are hiking their prices as winter sets in, but there are ways to keep the bills down
HOUSEHOLDERS face 17 years of above-inflation increases in energy and water bills, the National Audit Office has warned. The spending watchdog says the average cost of energy bills is due to rise by more than £700 a year by 2030 in order to pay for the renewal of the UK's utilities infrastructure. The government insists it is "committed" to keeping bills down but the National Audit Office has expressed particular concern that low-income households will struggle to afford light and heat over the next two decades. As five out of six of the UK’s largest energy companies have already announced price hikes for this winter, here are several ways householders can reduce their own energy bills...
Which companies have put their prices up?
EDF Energy is the latest of the Big Six to announce a rise in prices. The French-owned group is planning an average 3.9 per cent rise in bills from 3 January 2014. Scottish Power has announced a rise of 8.5 per cent for gas and 9 per cent for electricity, while Npower said it will be charging its customers 9.3 per cent more for electricity and 11.1 per cent more for gas from 1 December. British Gas will increase its bills by 8.4 per cent for gas and 10.4 per cent for electricity from 23 November, while SSE will increase its prices by 8.2 per cent for both from 15 November. Out of the Big Six, it is only E.On that is yet to announce a rise.
What fixed tariffs are available?
Fixed-term energy deals are becoming an increasingly attractive option as prices soar. Most suppliers offer a fixed-price deal, in which they freeze the cost of electricity and gas units for a set period. However, some tariffs do incur cancellation penalties if you pull out early. One of the cheapest tariffs at the moment comes from First Utility, which costs an average £1,178 a year, compared to the average annual bill of £1,353. The longest fixes currently available are with Npower which is fixed until December 2017 and EDF which is fixed until March 2017.
Are there any other discounts or deals?
David Cameron has recommended shopping around for the best deal in order to save cash, a process made easier in recent years with the introduction of price-comparison websites. Paying bills by direct debit and sending off regular meter readings to ensure you are paying for actual usage can also help to save money, as can signing up for both gas and electricity from one supplier and changing to online-only bills.
How else can you keep costs down?
Draught-proofing your house and insulating hot water cylinders and exposed pipes can help save cash by keeping heat in. Campaigners say investment in house insulation is the only way to control high energy bills and have called on the government to help home-owners tackle the problem. Installing a room thermostat can also help regulate where and when you heat your home, while ensuring lights and appliances are turned off when you don't need them can also contribute to lower energy bills. You could do as energy secretary Ed Davey does: wear a jumper and turn down the heating. Reducing room temperatures by just 1C could apparently cut your heating bill by as much as £65 a year. However, Public Health England has urged people to keep their living rooms heated to at least 21C and other rooms at 18C to avoid potentially fatal health problems.
How do UK costs compare with prices in other countries?
According to the Department of Energy and Climate Change, average domestic gas prices in the UK are lower than several European countries, including Germany, France, Ireland and Spain, but more than double the prices in the United States. For electricity, UK prices were the fourth lowest among 15 EU countries. However, the UK is second only to Estonia for people struggling to pay their energy bills across Europe, with more than five million UK households living in ‘fuel poverty’. Campaigners says households pay much higher bills due to the amount of heat lost from homes.
Where does our money go?
The majority of costs go towards buying gas and electricity on the wholesale market. This – together with running the business and taking profits – accounts for around 67p in every £1 spent in the gas market and 58p in every £1 for the electricity market. Distribution charges cost around 16p per £1, while VAT costs 5p. The green levy imposed by the government – to pay for schemes to help save energy, reduce emissions and tackle climate change – costs between 6 and 11 per cent of a typical fuel bill, while other costs include storage and distribution. ·