UK households saw their energy bills rise by an average of 47% for gas and 28% for electric last year, but since providers passed on their second round of price hikes last summer, wholesale energy costs have plummeted.
The price energy providers are paying for gas has nearly halved since its peak of 100.25p per therm in July 2008. Scottish Power is the only provider to announce lower prices - with a 10% price cut to it's PriceSure fixed energy tariff. However, with energy costs expected to fall, it may not be the best time to lock in to a fixed rate product.
The Government has warned that energy firms will be forced to slash the prices they charge retail customers if they don't pass on recent wholesale reductions voluntarily, so the good news is that lower bills are on their way. The bad news is that it could be another couple of months before we see prices fall. In the meantime, however, there are steps you can take to reduce the amount you're spending on gas and electricity.
Check to see if you are on the cheapest deal
The first thing is to switch tariff. Most households have never switched energy provider and as such will be paying the standard rate, which is not the cheapest option. Online tariffs offer much better value and the most cost efficient way to pay for your gas and electricity is by monthly direct debit, rather than quarterly by cash or cheque.
British Gas has launched a new deal, WebSaver 1, to replace Click Energy 6. WebSaver 1 guarantees to be at least 10% cheaper than British Gas' standard tariff until March 2010. The average household could save more than £270 a year by switching from British Gas' standard deal to WebSaver 1.
WebSaver 1 will be the best option for many households but depending on where you live and how much energy you use, you may find one of the other providers' online tariffs is cheapest for your circumstances.
Identifying the best deal for you is easy: all you need to do is input your postcode and details of your current energy tariff into our
gas and electricity comparison tool. It will then pull up all the deals available to you showing the likely annual cost of each as well as the difference between that and your current annual bill.
The table below illustrates the savings that can be made by moving from a company's standard tariff to its best tariff - which is invariably its online direct debit deal:
Difference between Standard & Online
Scottish & Southern
Source: moneysupermarket.com on January 5, 2009.
Other ways to cut your bills
Switching energy tariff could save you hundreds of pounds a year but there are other simple ways to slash the amount you spend on gas and electricity. These include:
Adjust your thermostat - according to the Energy Saving Trust, reducing your room temperature by just 1°C could save you around 10% on your heating bills. Also adjust the cylinder thermostat on your water to 60°C.
Remember to turn lights off when you leave the room.
Close curtains to stop heat escaping.
Only boil as much water as you need, but remember to cover the element in the kettle.
Use energy saving lightbulbs - they last around ten times longer than ordinary bulbs and can save you £40 over the lifetime of a bulb.
Don't leave appliances on standby and avoid leaving electrical items charging unnecessarily.
Consider investing in a lagging jacket for hot water pipes and insulate pipes - this could pay for itself within a few months.
Defrost freezers regularly and don't leave the fridge door open longer than necessary to ensure it runs efficiently.
Consider investing in loft insulation as 25% of heat lost in a home disappears through lofts without it.
Fix leaking taps - a dripping hot water tap could waste enough energy in a week to fill half a bath so make sure it's turned off.
Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.
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