In Depth

Energy bills: how to save money on gas and electricity

There are lots of things customers can do to ensure they are getting the most for their money

British Gas is hiking gas and electricity bills for the third time in just over a year, announcing it will be adding £44 to the typical fuel bill for 3.5 million customers on its standard variable tariff.

In April, Britain’s largest energy provider announced a price increase of 5.5%, costing the average household an extra £60 per year, on top of the £78 increase brought in last August.

It is the first time British Gas has lifted tariff rates twice in six months since 2010, said Rik Smith, of comparison site USwitch.

Last month, British Gas’s owner, Centrica, said it was considering a further price increase after wholesale prices rose and competitors put up their rates.

E.On, SSE, Npower, EDF, ScottishPower and Bulb have all hiked energy prices, blaming wholesale energy costs for the increases.

Centrica says the cost of buying energy has risen by 20% since April, driven by a global rise in oil prices over the past year that “has fed through to wholesale gas prices, which affect both domestic heating and electricity generations”, reports the BBC.

Others have argued that the impending law capping energy tariffs is the real reason for the sudden hike in prices, with companies looking to raise their rates early before the cap comes into effect this autumn.

It follows a decision by the energy regulator, Ofgem, earlier this week to raise its safeguard tariff, which protects millions of prepayment meter customers from being overcharged on poor value deals, by £47 a year to £1,136 for dual fuel customers from 1 October.

But “by pinning the hike on the same reasons used by Ofgem only a day earlier to justify a hike to its regulated price cap the supplier has reignited a war of words with the regulator”, says The Daily Telegraph.

Whatever the reason, The Guardian says “the increase will put further pressure on household budgets squeezed by wages, which have barely kept pace with inflation”.

So what can be done about it? From changing suppliers to draught-proofing your house, we look at the ways you can keep costs down:

Shop around and make a switch

Experts recommend shopping around for the best deal in order to save cash, a process made easier since the advent of price-comparison websites.

The consumer group Which? says customers who used its independent comparison site to switch are currently saving an average of £237 a year on their gas and electricity bills.

Signing up for both gas and electricity from one supplier and changing to online-only bills can also reduce costs.

Consider a fixed-term deal

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.

The price comparison site uSwitch lists the numerous pros and cons of fixed term deals here.

Pay monthly

You can save an average £75 a year by paying your energy bills by monthly direct debit rather than when you get a bill, according to MoneySavingExpert’s Martin Lewis.

Just make sure your direct debit amount is accurate and you aren’t massively overpaying or underpaying. Underpay and you could get landed with a shock bill, overpay and you are building up a cash pile with your energy provider that is unlikely to be earning you any interest.

Install a smart meter

The roll-out of so-called smart meters has been widely touted as a way to save energy and reduce carbon emissions while also cutting down on electricity and gas bills.

The government is spending £11bn on installing 53 million smart meters to 30 million homes and businesses by the end of 2020. However, a cross-party report by MPs, published last month, said the government was likely to miss its own deadline and the expected saving on an annual dual fuel bill had plummeted from £26 to just £11.

Despite questions about the implementation and cost benefits of smart meters, Robert Cheesewright, director of policy and communications at Smart Energy GB, said the roll-out was a “vital investment for Great Britain”.

“All smart meters mean an end to estimated billing and give people a greater understanding of their energy use. Smart meters are also making prepay cheaper and more convenient, bringing the way we pay for our energy up to date, enabling customers to top up online or over the phone,” he explained to City A.M.

Give accurate meter readings

Unless you have a smart meter you need to give your energy provider regular meter readings. If you don’t your bills will be based on estimated usage, which could mean you pay far more than you need to. Alternatively, it could mean you are underpaying and when an accurate meter reading is eventually seen you get a big bill.

Make your house more energy efficient

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.

Switching to energy-saving LED lightbulbs is another quick way to save. Over its lifetime, it could cut up to £180 from your energy bills, compared with an old-style bulb, says Which? 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 lowering your bills.

Turn down your thermostat

You could also do as former energy secretary Ed Davey does: wear a jumper and turn down the heating. Reducing room temperatures by just 1C could cut your heating bill by up to £85 a year, according to the Energy Saving Trust. However, Public Health England has urged people to keep their living rooms heated to at least 21C and other rooms at 18C to avoid health problems.

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