Energy shake-up: will it mean cheaper prices?

Published:
21 November 2012
Topic:
News,Gas & Electricity

The government has issued plans to simplify the energy market and make it easier for people to find the cheapest tariff.

The proposals are designed to ensure "all households are on the best deal for their gas and electricity as soon as possible". Consultation on the ideas will run until January 4 2013 and measures will be included in the government's forthcoming Energy Bill.

So what has the government proposed?

The government wants every household to be on the cheapest energy tariff available.

One of the main reasons why so many people - around 50% - have never changed their energy provider is because they are confused by the sheer number of products available and how the pricing works. This is why the government wants to simplify things and this is how it plans to do so:

  • Energy providers will be limited to the number of different tariffs they offer. The maximum they can have will be four for gas and four for electricity. One must be a standard tariff where the price is variable, and there must be at least one fixed rate product.
  • The government wants energy firms to have moved all customers onto their cheapest tariff by 2014, based on the type of product they've chosen to be on. For example, someone on a variable rate deal will only have to be moved onto the cheapest variable product even if the provider has a fixed deal that costs less.
  • Providers will have to get rid of 'dead tariffs' which are out of date and customers have been languishing on for years and customers will be moved onto a better deal.
  • Discounts for things such as payment by direct debit or dual fuel will still be allowed.

And will it succeed in creating a simpler, fairer market?

Clare Francis, consumer finance expert at MoneySupermarket, said: "The government proposals are a step in the right direction in terms of ensuring less complexity in the market, especially as gas and electricity prices continue to rise, but this is not a silver bullet for instant savings on energy bills.

"Competition in the energy market remains vitally important if we are to try and keep prices down. While the intention from the government plans seems to be to help those many people who have never switched to get a cheaper deal, the devil is in the detail. There are numerous ways the government's proposals could be interpreted by energy firms so it remains to be seen what impact this will have on the market.

"At the moment those getting the best deals are the people who switch and have internet access, as the cheapest tariffs are those that are managed online. But people who don't use the internet, often the elderly, and those with pre-payment meters, many of whom are households on low incomes, are the ones paying the most for their energy yet they are the people who can least afford it. It is this unfairness that needs addressing. Hopefully, if providers have to be clearer about the pricing plans available and proactively move customers onto cheaper tariffs, it will help address this problem."

Don't wait to act though!

It will take months before any changes are implemented, yet millions of households across the country are paying more than they need for their gas and electricity.

With the latest round of price hikes now taking effect and the cold winter months virtually upon us, there is no time to waste in ensuring that you are on the best deal.

If you have never switched energy supplier, use our free comparison service to see how much you could save and set the switching wheels in motion.

Changing energy tariff is more straightforward than many people think. The process can be started online with a few pieces of information garnered from a recent bill. Some people wrongly believe it involves new meters and pipework or cables, but that is not the case. Gas and electricity comes into your home in exactly the same way, it's just a different firm providing it.

You may be entitled to help with your bills

In addition to switching provider and changing payment method to direct debit, energy users should also check to see if they are entitled to any help with their fuel bills. Home Heat Helpline, estimates one in 10 households - some 3.4 million across the UK - are entitled to help, but many are not aware of the support available.

The service says the help available is worth an average of £160 and includes grants for insulation, new boilers, discount and rebate schemes. It can be reached on 0800 33 66 99 or online at: www.homeheathelpline.org.uk

Become more energy efficient

There are a number of energy-saving tips for every household to reduce keep warm, reduce energy consumption and lower bills.

  • Turn thermostat down by 1˚C to cut your heating bills by up to 10%.
  • Only heat rooms that are in use. Turn off lights in empty rooms.
  • Turn appliances like TVs and phone chargers off at the wall rather than leaving them on standby.
  • Replace light bulbs with energy efficient versions.
  • Draw curtains at night to prevent heat escaping.
  • Insulate your loft and cavity walls. An insulated loft can knock £175 off your annual energy bill, while cavity wall insulation could save a further £135. You might even be able to get your loft and cavity walls insulated for free. The Big Six Energy firms all have insulation offers available at the moment so it's worth finding out if you qualify. Local councils also often have grants available for pensioners and those on low incomes to insulate their homes.
  • Do your washing at 30 ˚C.
  • Take showers rather than baths - a shower uses a third of the water of a bath.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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Kevin Pratt

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Content Editor, Insure and Home Services

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