Author Gina Clarke
Utility bills and energy prices are on the rise as energy prices keep rocketing year on year. Research by financial planners Tilney has found that utility costs have risen at a rate of three times the rate of inflation over the past 20-years.
With energy giant British Gas raising its tariffs by as much as 12.5% in the autumn, MoneyGap takes a look at just what is happening to the energy market including top tips to help you stay warm for less this winter.
Just as the start of the winter weather approached, British Gas (owned by Centrica) announced it was once again upping its energy prices, but the increase of 12.5% was too much to bear for some of its loyal customers. Instead, it led to a mass exodus of 820,000 customers. As they voted with their feet and left the company, the shock decision led to a crash in the markets that wiped £1.4bn off the share value this earlier this year.
A costly winter
However, with a majority share of the market that still leaves thousands of households on expensive tariff’s, this winter could be incredibly costly one for some of the most vulnerable. Right now the energy market is divided up into the ‘big 6’, a group of energy suppliers who together supply most of the households in the UK. This is set to become the big 5 as two suppliers, Scottish & Southern Electricity (SSE) and Npower have decided to merge.
Together this could mean that nearly half of all domestic energy accounts would be controlled by just two suppliers, the SSE/npower take over and British Gas. So worried is the Competition and Markets Authority (CMA) about a lack of competition in the energy field that it is currently investigating the proposed merger.
However, SSE chief executive Alistair Phillips-Davies has been keen to reply back to the CMA with the news that the merger will bring about a “completely new model” for the UK supply market.
“SSE recognises that the energy market is changing and we need to do things differently. With its own board and management team, the new supplier will be better able to meet customers’ future needs in what is a rapidly changing market,” Phillips-Davies wrote in an open letter to the CMA.
The market is indeed rapidly changing as the UK government plan to shake things up with a proposed cap on energy prices.
The new cap was announced in the Autumn statement last month. The Prime Minister believes that the cap will save 17 million households around £100 a year from, as she calls it, “rip-off” energy prices but there are some exceptions. As to when the cap will be introduced analysts believe it is unlikely to take effect until the start of 2019 at the earliest, due to the length of the legislative process. It will be in place until at least the end of 2020, but licensing body Ofgem will be able to extend it until the end of 2023.
However, the draft legislation does not spell out at what price the average dual fuel bill will be capped, although the government suggests it will be likely to be around £100 a year.
But it’s bad news for users of green energy as these are exempt. Suppliers that offer green tariffs, currently standing at around 7 million homes, suggest their customers could lose out due to a loophole, expect to see campaigning to change the legislation around this issue.
The government’s intervention comes as record profits for energy companies prompted Citizen’s Advice to look into just how much energy companies are making from their customers. According to the charity, the big networks are sitting on over £7.5bn of excess profits. This is money that is not reflective of performance and is simply in excess of what is required. Citizens advice say,
“The regulator intended the best-performing companies to earn double-digit returns while the worst earn only enough to pay the cost of their debt. Instead, the average company profit is 10% and none earn less than 7%. Energy networks are enjoying a multi-billion pound windfall, paid for by consumers.”
It is hoped that the cap would go some way to change this.
With so many shake-ups’s on the way 2018 could provide a radically different looking energy market, but remember, none of these changes have been introduced yet. So if you’re on a high tariff or looking to cut down on energy bills, here’s what you can do.
How to save on energy prices?
Here are a few ways to keep your costs down this winter.
- Switch: As noted above, changing energy supplier is an easy way to avoid hikes and take money off your final bill. Regardless of owning or renting, switching should still be an option.
- Direct debit: This option is usually cheaper as you should gain a discount on regular payments.
- Use less: The obvious solution but the less energy you use the lower your bills.
- Generate more heat: By investing in better insulation, a new boiler, or solar panels, it can all save you money. Plus, there are even government grants for some home improvements.
Using less energy
From the Energy Saving Trust (http://www.energysavingtrust.org.uk here are some top tips to help keep you save costs. Follow one or use them all to see a reduction in your energy bills.
- Turn down your thermostat – just reducing it by 1°C could cut 10% off your heating bill – it usually saves around £55 per year.
- Whenever you leave a room turn off the lights.
- Fill up your washing machine, tumble dryer and dishwasher – one full load uses less energy than two half loads. Wash your clothes at 30ºC and don’t use the tumble dryer if you can avoid it.
- Don’t boil more water than you need – making a cup of tea? Just boil enough for a cup of tea.
- Use energy saving light bulbs as they last up to 10 times longer than ordinary bulbs and don’t cost much more. Using one can save you around £55 over the lifetime of the bulb.