Author Mark Richards

E.On is the latest company to increase energy prices: is there anything consumers can do about it?

It has not been a good week for our wallets. Wednesday’s Budget saw Chancellor Philip Hammond increase duties on cigarettes and alcohol, hit the 15% of the population who are self-employed with increased National Insurance contributions and generally signal that there would be more pain in the Autumn Budget. As we wrote recently, the ever-increasing social care bill and the need to radically overhaul education are bills that will inevitably have to be paid by today’s working population.

The latest energy prices rise

But recently the real blows to our disposable income have come from the energy companies, with E.On the latest company to join the list, announcing last week that it would increase its ‘dual fuel’ standard variable tariff by 8.8% from April. For those customers not on ‘dual fuel,’ electricity prices will rise by 13.8% and gas prices by 3.8%.

By anyone’s standards, those are hefty increases – well above the rate of inflation. The Chancellor made the point in his Budget that wages are increasing in real terms: they are certainly not increasing by that amount.

Casting around for a scapegoat, E.On blamed the social and environmental schemes which support renewable energy – which we are all paying for through our bills.

The announcement was met with howls of protest from both consumers and energy bill experts alike. Mark Todd, director of Energyhelpline, called it, “A bitter blow to households” and, “a monstrous price rise.” He added,

“This massive increase will be very tough for customers to swallow and once again it is loyal, standard rate customers who are hit the hardest.”

So is the answer to switch energy suppliers? This seems to be the strategy the Government wants us to adopt – even though a recent survey showed that the average switch only saved £25 per year. And even that saving may now be in question, given that virtually all the energy companies have increased their prices recently:

  • Scottish Power’s standard electricity prices will increase by 10.8% at the end of this month: gas prices will rise by 4.7%
  • Npower is imposing an even steeper increase, with electricity prices rising by 15%
  • EDF Energy is contenting itself with a more modest rise of 8.4% in electricity prices.

The only light on the horizon among the ‘Big 6’ is British Gas, which is freezing gas and electricity prices until August – possibly in the hope of attracting new customers who do decide to switch.

These increases have come despite a fall in many companies’ wholesale energy prices (the price at which companies buy the electricity or gas before selling it on to the consumer).

So what’s going to happen when the wholesale energy prices rise? Clearly, the utilities companies will all increase their prices and they will waste no time in passing the increases on to us. If they have all increased prices then switching is unlikely to save much money – and neither will wandering round the house switching off the odd lightbulb.

The big users of electricity in your house are anything that involves heating – your washing machine, tumble dryer and possibly your dishwasher. But even cutting back on these appliances may not save significant amounts, especially for families with children.

Alternatives to turning the heating down

Energy alternatives

None of us want to spend the winter shivering, so what are the alternatives to turning the heating down? The answer could be to use a smart meter or look to insulate your home and/or use alternative forms of power, such as solar panels. As we wrote recently, the great majority of the UK’s housing stock will need insulation work at some point over the next 30 years, with the UK having committed to all but eliminating carbon emissions by 2050.

For most homeowners, insulation makes economic sense: the problem is that it is expensive in the short term – and with so many families ‘just about managing’ at the moment, laying out a large sum of money on insulation just isn’t feasible.

Maybe the answer is to have a ‘smart meter’ – although it has to be said that they have not enjoyed a good couple of weeks for publicity, with one SSE customer, Mrs Allen from Portsmouth, being charged £30,000 for a single day’s usage. Generously, SSE conceded that it was a “mistake resulting from an error” and that she would not be charged.

What exactly is a ‘smart meter?’

Simply put, a smart meter is a new kind of gas and electricity meter that digitally sends a reading to your energy supplier. Most smart meters come with monitors – so that you can more easily understand your usage – and the intention is that every home in the country will have a smart meter by 2020.

In theory, smart meters are a good idea; they give more accurate bills (unless you are Mrs Allen…) and allow you to monitor your energy usage so you can make savings. They should also enable faster and easier switching between suppliers and the introduction of more innovative energy tariffs.

In theory, the installation of your smart meter should not cost you anything: it is already accounted for in your gas and electricity bill. In theory…

Installing solar panels

So smart meters are coming; what about supplying your own energy by using alternative power? For the vast majority of us, that means solar power, through the installation of solar panels.

Thanks to improved technology, the cost of installing solar panels has dropped significantly: it is now reckoned the average home installations costs £5,000 to £8,000. Will you make money on this? Yes, you will over the long term – but it won’t make you rich. You will, however, have the satisfaction of knowing that over a 20 year period you will have saved 40 tonnes of carbon emissions. You are also likely to increase the value of your home – although again, not by a significant amount.

One thing is for certain: for most families, energy bills are going to be as big a problem as anything the Chancellor has planned. Anything we can do to bring our bills down is going to be time – and money – well spent.