Clare Francis: All six major energy firms have now reduced their prices, but what does this mean for the average household? One thing that a lot of people perhaps don’t realise when it comes to gas and electricity prices is not only does the price depend on what sort of tariff you’re on, but it also depends on whereabouts in the country you live, and some regions pay more for their energy than others.
So Scott Byrom, who’s the utilities expert here at moneysupermarket.com is with me just to explain why this is the case and what we should all be doing about it.
Q1: Scott, we’ve had all the price cuts now; we’re seeing a bit of tit-for-tat price cutting ongoing between some of the providers as they try to undercut each other on the cheapest tariffs.
But if we look at the standard tariffs, which is what most people are on, there is a difference depending on whereabouts in the country you live. Why does this happen?
Scott Byrom: Just to make it clear, it’ll be on for all products really, across all regions - 14 different regions across the UK. The reasons behind it are to do with the distribution cost, all that type of stuff; whether a suppliers targeting a certain region and a certain customer to take business from a competitor - so it’s all part of strategy as well.
Obviously the cost in distribution might be that, say if you look at Scotland for example, the cost of getting energy out to Scotland where there’s only a few properties will be a lot more. There’s all different companies in between as well that the energy providers have to pay for the distribution costs, so all that tallies into why there’s different prices by different regions.
Q2: So I guess you can perhaps see that if we look at the map that we’ve done of the different regions in the UK, that the South East is where energy is the cheapest and presumably that’s because of the density of the population and things like that?
SB: Yes certainly. Again as well it might be that there’s a certain target down there as well, that suppliers are really trying to compete for that business. But yes, also again for the London example, around and about that region obviously the number of properties around there is quite significant compared to Scotland or other areas like that.
Q3: So I guess one way we can fight back as consumers is to actually not put up with this any longer?
If we’re actively switching, then it means the providers will have to fight harder to get our business so that’s the message is it? So even though the bills are coming down, get out there and switch?
SB: Oh yes, definitely, without a doubt. The more we vote with our feet then the more the suppliers have to think about it, they have to change their prices accordingly. If we sit still we’re playing into their hands and making it easy for them, so it really is a case.
But it’s not only that, it’s the fact that if we move as well there’s massive savings to be made. If you’re still in your region, for those two businesses that would have predominately owned your region - so if we take the MANWEB region for example…
CF: Which is?
SB: British Gas for gas, and Scottish Power for electricity…
CF: So that’s North Wales?
SB: North Wales, Liverpool, the Wirral, around and about that area.
You’d be with British Gas and Scottish Power for electricity, so if you remained with them then you’ll be paying around £250 more a year than you would be if you moved to the cheapest deal.
The other reasons as well for why, for core regions - so British Gas and Scottish Power because they own the majority of customers in that region - you might find or you will find the fact that the prices will be a little bit higher than they would be in other regions?
The reason being, again because energy suppliers know that we tend to have this apathy to move on to a better deal and that type of thing, so because of that they can - I know it sounds wrong – but essentially they can get away with charging slightly higher rates, which unfortunately is the case.
CF: They rely on inertia basically…
SB: Exactly, so as consumers we need to make sure we are moving as frequently as possible.
Q4: And it’s easy to do, because we have already done a video haven’t we – showing people how to. But you go onto our price comparison tool; you just put in your postcode, current providers details and within a minute or two it brings up all the list of providers and you can see which is going to offer you the cheapest option?
SB: Yes exactly. I suppose it’s important just to make that clear – the reason why we ask you for your postcode is to identify the region and therefore the rates that apply to you correctly, so yes it’s all part of the comparison - a few minutes max.
Q5: And the cheapest deals are online tariffs which you manage online. The cheapest option with regards to payment is with direct debit, and there has been a lot in the press hasn’t there recently about direct debits and whether or not companies are over-charging people on purpose and this, that and the other. But Ofgem has said that it doesn’t think that the energy firms are necessarily purposely charging us more then they should, but they do need to make it clearer about how you’re charged?
SB: Yes I think there’s probably two things that need to happen. The energy suppliers need to make it clearer – their bills are very confusing. As a consumer, the amount of things that are on there - you’ve got discounts, you’ve got tier 1, tier 2; you’ve got different thresholds and its all split and its very complicated - so they need to clear that up is one thing.
The other thing from a consumer point of view, in terms of monthly direct debits being higher than you thought they would be and that type of stuff, is really to encourage customers to, although it’s easy to pass the blame to the energy suppliers, again its that message of we as individuals need to take control ourselves, and the best way to do that is an online deal.
If you get an online deal, you can easily – every day, whenever you want, as frequently as you want – go online, check your payments, check your consumption, make sure everything’s accurate, make sure you’re not in debt or in credit, and really just tie everything down and make sure you’re paying for everything you’re using.
CF: And one of the things is of course is we are heading for summer now, hopefully…
SB: Fingers crossed…
Q6: …But for some people they might see that they’re actually in debt at the moment because they have used so much over the winter months? Assuming you are on the best value product for you, and you don’t need to switch at this moment don’t necessarily worry about that too much because it should even out over the summer shouldn’t it?
SB: It should do, yes. What you might find is, because the energy suppliers won’t want to be in debt on any of their accounts, if they do ask to increase the monthly direct debit, speak to them and say you think on the basis that your consumption is going to be coming down, there’s no need to increase direct debits – obviously because you’re consumption is going to be less during the summer, and therefore you’ll start paying off that gap that you’ve built up over the winter.
So yes, be aware of it, look into it, speak to your energy supplier and make sure they don’t try take advantage and increase your monthly direct debits too much.
CF: So the key message is, even though prices have come down, you can still probably save more by switching?
SB: Oh yes, definitely, especially again the main message to those standard [tariff] customers – big savings out there.
CF: Great, thanks Scott.
SB: Thank you.