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Householders cranking up the heating for winter have been given a glimmer of hope over future gas bills, with the news that energy companies are likely to drop their prices next year.
Scottish and Southern Energy said last week that it was 'optimistic' that its prices would fall in 2009 as wholesale prices continued to dip. The announcement came on the back of analysis by price-comparison website theenergyshop.com, which believes gas prices should fall by 10 per cent and electricity bills by 5 per cent. This would amount to a reduction of around £80 a year on a typical gas bill and £25 off a typical electricity bill.
'While it is good news that prices are set to fall, unfortunately householders are unlikely to notice much of a difference after average bill increases of £370 this year,' said Joe Malinowski of the Energy Shop.
However, Mark Todd of price comparison website energyhelpline.com is optimistic that overall falls could be greater than 10 per cent. 'During past recessions, commodity prices have fallen,' he says. 'If this trend repeats itself, we should witness further reductions in the wholesale price of gas. If the price falls far enough then the increases in prices from the summer should be able to be reversed, meaning drops of 25 to 35 per cent in gas prices.'
Which tariff to switch to
The news will be of little comfort to those who receive their winter gas bill early next year as it will reflect this year's price increases. So, while all suppliers have now put their prices up, it is still worth comparing those prices across suppliers and considering a switch if you haven't already done so.
There is a £230 difference between the price of the most expensive average dual-fuel bill on a company's standard tariff - the one you will be on if you have never switched - and the cheapest dual-fuel online tariff. The prices, from the Energy Shop, show that for the same household, Scottish Power's standard duel-fuel tariff costs on average £1,289, compared with British Gas's Click Energy 6 tariff, which costs £1,057.
The cheapest way to pay your bills is by monthly direct debit and the cheapest tariffs are all online-only - meaning you won't be sent paper bills and will manage your account solely on the internet. Most of the time it works out cheaper to get both gas and electricity from the same supplier, as suppliers offer a discount for dual fuel. However, because companies charge different amounts for electricity depending on where you live, it is worth using the price comparison websites to check separate prices for gas and electricity as well as comparing dual-fuel deals.
One option that is no longer worth considering is a fixed-rate tariff. These offered great value at the beginning of the year, as they allowed householders to lock in to the cheaper rates for a year or more, but now suppliers have put the prices of these up.
Paying too much or too little?
While paying by monthly direct debit is the cheapest method, there is a danger that people who have been paying this way this year may have built up a debt with their supplier. This is because prices have gone up and, unless you have amended your monthly payment, you will be paying older, cheaper rates.
'If your direct debit has not been adjusted for either of the two price increases this year, your monthly payments will need to rise by around 70 per cent to make up for the higher prices and the payment deficit that you have accrued,' says Malinowski.
If, on the other hand, you are in credit to your supplier you need to decide whether to ask for that money back. There are two arguments in favour of getting your money back. In the last two months two small energy companies, Bizz Energy and Electricity4Business, have gone under and if your supplier does go bust you are unlikely to have that money returned. However, if, like the majority of householders, you are with any of the big six energy suppliers (British Gas, EDF, Eon, Scottish and Southern, Npower and Scottish Power) this is unlikely.
The second argument is that while your money is with your energy company and not being put towards bills you are effectively acting as its bank and earning no interest on that cash.
There is also a strong argument, however, for leaving your account in credit in order to offset the higher winter bills. And, in any case, it is hard to earn a decent rate of interest by putting that money in a savings account at the moment.
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