Wholesale energy prices recently reached a three-year high, making it more important than ever to check you’re on the most competitive tariff possible.
Wholesale prices are the prices energy providers pay for the gas and electricity they sell to us. When wholesale costs rise, these higher costs are passed on to consumers, bumping up our gas and electricity bills.
An energy price cap is in place to limit the amount that energy companies can charge their customers, currently set at £1,138 a year, but this is expected to rise in October. The good news is that there are still plenty of energy deals available that cost less than the current cap, but don’t wait to switch as some providers are already hiking their prices. Bulb, for example, has just announced that energy bills for 1.7m of its customers will rise by 6.5% in June, its second price increase this year.
Don’t stick with the default tariff
If you’re currently on your supplier’s standard variable energy tariff, then you’re almost certainly paying more than you need to for your gas and electricity and should look into switching as soon as possible.
Kevin Pratt, personal finance expert at finance website Forbes Advisor said: “There are around 11m households on poor-value standard variable default tariffs. These are subject to Ofgem’s energy price cap, which can provide a false sense of security to customers who assume they’re getting a decent deal. But the reality is that default offerings are relatively expensive when compared to many fixed rate tariffs, which lock in the price per unit of energy used for the duration of the deal, usually 12 months.”
Even if you’re currently tied into a better deal, it’s still worth checking when this is due to end, so that you can move to another competitive tariff at that point. According to research by comparison site Comparethemarket.com more than 218,000 households were set to automatically move onto more expensive ‘default’ energy tariffs in May alone if they failed to switch tariffs or providers when their deals came to an end.
Tom Lyon, director of energy at Energyhelpline.com said: “With many cheaper deals on offer, switching to a fixed rate tariff will help keep costs down at a time when we are seeing energy prices increase.”
You might also be able to reduce the cost of your energy bills by changing the way you pay. Stephen Murray, energy expert at MoneySuperMarket, said: “If you’re one of the 7.1m households that is not paying their energy bills via direct debit, you might want to reconsider. Not only is paying by direct debit easier, it will most likely be cheaper, because most suppliers often offer a discount to customers that pay by direct debit.
“Recent developments have also made paying by direct debit more attractive. New Ofgem proposals concerning ‘in credit’ balances will require energy suppliers to automatically repay any direct debit customers that are more than 5% in credit, putting an end to customers having to request their money be repaid in the event that their account is in surplus.”