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Clare Francis: Winter is fast approaching but households are yet to feel the full impact of energy price rises we saw earlier in the year, and to make a bitter pill even harder to swallow, wholesale prices have started to fall back in recent weeks yet there is no sign that any of these reductions are being passed onto the consumer.
Energy providers blamed rising wholesale oil and gas prices for the reason why consumers like you and I have seen our gas bills rise by an average of 52% this year, and electricity bills go up by 28%, yet over recent weeks these prices have been plummeting. Oil which peaked at $147 a barrel back in the summer is now back down to around $70. So why aren't we seeing energy providers pass on some of these reductions?
We are being warned that it could be early next year before we see our prices start to fall and even though consumer watchdogs are putting energy providers under pressure, and so to is the Prime Minister, Gordon Brown, they are digging their heels in and warning that we are not likely to see our energy prices fall anytime soon. So why is this the case? Well, lets ask Scott Byrom who is the utilities expert here at moneysupermarket.com.
Q1: Scott this seems really unfair doesn't it, because consumers have seen their bills rise massively this year and it was blamed on rising wholesale prices; but now wholesale cost are falling we are not seeing any of the benefit - why is this the case?
Scott Byrom: I think the first thing to bear in mind is the fact that energy suppliers actually buy their energy well in advance. So we have seen oil prices drop, I think they have halved since July, but I think what we need to bear in mind is that the energy we are now using and we will continue to use throughout the winter months is going be at the old prices. So the new prices we might be thinking energy suppliers are getting their gas and electricity for, they won't actually be into play. If we are going to see energy prices fall I would expect it to be early next year, March, but at the moment there is certainly no indications that that will happen.
Q2: So it's quarter two, so it's going to be a tough winter for us all?
Scott Byrom: Yes definitely, I think so.
Q3: What can people do then to minimise their energy bills, because over the weekend there were stories about people who rely on estimated bills potentially being over charged because with prices having gone up over the summer rather then being charged the new higher price from the date that it took effect, you are charged it from the beginning of the period since your last statement - is that how it works?
Scott Byrom: It is, the biggest issue is that the majority of people will receive an estimated bill, the reasons being is that energy suppliers can't get round to everyone's house and obviously check everyone's meter to take an actual reading. So the issue being there is that the energy supplier can only look back at pervious consumption and therefore make an estimate and say 'right okay, this is how much we think you owe us' - it's actually down to the consumer, if they can, to take an actual meter reading and supply that to the energy provider directly, that will then ensure that they are getting accurate bills and paying for exactly what they are using.
Q4: And one other thing that I think a lot of people struggle with is the fact that, although people might come round to read your meter, it's quite often in the day when you are out at work and not around to answer the door, but you can do it yourself can't you and then pass the information either online or ring the provider?
Scott Byrom: You can yes, for the majority of people the best thing to do is to phone the supplier directly - you will be able to get the contact number on the actual energy bill - but the best thing and the best tariffs on the market at the moment are the online products. They actually have an online account, so the customer logs into their account with their own user name and password and they can just enter in their actual meter readings. So nip outside, get the meter reading, key it in and then your account updates straight away.
CF: And it is really easy to do isn't it, because I do that -
Scott Byrom: - Really straight-forward yes, I do it myself. Literally go outside, get the details and type it all in.
Q5: And that's the way to ensure you are going to be billed absolutely accurately?
Scott Byrom: It is yes, because if you're getting an estimated bill, say you're getting that estimated bill for throughout a year you might come to the end of the year and then an actual meter reading is taken, and the supplier say 'oh, actually your consumption has gone up, you've got a new plasma TV or whatever it might be - your comsumption has gone through the roof and you owe us a lot more'.
Q6: The flipside of that is that you can actually end up being in credit with the provider isn't it, and actually being owed money yourself and that is one of the things that can result if you pay by monthly direct debit, which is obviously the cheapest way to pay. If your account is in credit obviously over the year it often balances out, because you might be in credit over the summer but then because you use more in the winter months it balances itself out, but if you are owed a few hundred quid the provider will come to you and say 'hang on a minute Scott, pay up, you owe us £250' - can you get the money back if they owe you?
Scott Byrom: You can, yes, you can phone up, and in fact an energy supplier should do a review of each account say every six months or so to make sure that if the account is in debt or in credit or everything is working out correctly, especially in terms if monthly direct debits, to make sure they are taking the right amount out each month. What a customer can do is actually chase up on that account and either say 'I want the credit to be deducted for my next bill' which will happen automatically, or you can ask for that to be re-credited back to the customer themselves.
Q7: We have sort of mentioned that direct debits are the cheapest way to pay, what are the average savings, what does that knock off paying by direct debit rather then paying quarterly?
Scott Byrom: Well it think the best example to take would be a standard tariff - quarterly cash or cheque is about £1,350, compare that to monthly direct debit £1,250, so its about £100 difference just for a payment method.
Q8: And that's just for a payment, and then there's further savings if you switch from that standard tariff onto one of the cheaper online deals?
Scott Byrom: If you move to an online one, again if we go from a standard monthly direct debit to a online monthly direct debit you are looking at about £200 saving. So in fact if you are on a standard, paying by quarterly cash or cheque - which the majority of us are -you are looking at about a £300 saving.
Q9: So even though most people have yet to feel the full effect of the price rises earlier in the year they can offset some of those rises by switching their tariff and payment method?
Scott Byrom: I would advise them to do is as quickly as possible, we say, the usual process can take between four to six weeks, it can happen quicker but it can take longer if there is a lot of vetting to take place if there is issues with debt on your current suppliers, but yes, do it as quickly as possible otherwise there might be a few surprises in the new year when those quarterly bills come through.
Q10: And what else can you do, because there are other simple steps that you can take which over the course of the year can significantly knock hundreds of pounds off the cost of your bills?
Scott Byrom: We have all this type of information on the utilities channel at moneysupermarket. Its things like washing your clothes at 30 degrees, closing doors to unoccupied rooms reducing the thermostat down by 1 degree, things like that, loft insulation, cavity wall insulation which obviously have been in the press quite a lot recently - there is loads of things you can do to reduce your bill.
Clare Francis: And not doing what I did the other night, and leaving your heating on constant by mistake.
Scott Byrom: Yes, definitely don't do that!
Clare Francis: Thanks very much Scott.
Scott Byrom: Thanks.
