Why you need to switch energy providers

The average household can save £300 a year by switching energy providers, according to the energy regulator Ofgem.

But paying the lowest possible amount for energy means you need to review your gas and electricity suppliers regularly.

Can I switch?

Whether you rent or own your home, you should be able to switch, as long as you are the bill-payer.

If you aren’t on a prepayment meter, you’ll need to pay any outstanding balance before switching. 

If you are on a prepayment meter, you should be able to switch, even if your accounts have negative balances of up to £500 for electricity and £500 for gas. 

If the balance is being billed to you even though it’s your supplier’s fault as part of Energy backbilling, you don’t need to pay. 

There are details about backbilling on the Ofgem website

The Energy Switch Guarantee means you can expect a safe, reliable switch to a new provider in 21 days. 

Why you need to provide an accurate meter reading 

Providing accurate meter readings at the start and end of your contract means you should pay the correct amount for your gas and electricity.

If you pay by regular monthly direct debit, you’ll have a fixed outgoing that will help with household budgeting, but it might not bear any relation to your actual usage. 

Your usage will vary from month to month so the best way to make sure your monthly direct debits reflect the amount of energy you use is to provide around 4 meter readings a year to your energy supplier.

It means your direct debit can be adjusted by your supplier and you won’t be caught out if you are not paying enough.

How not to overpay your energy bill

Nearly 13 million households in Britain are owed a total of £1.7 billion by energy suppliers.

That is an increase of £230m, or 13.5%, between 2019 and 2020.

Uswitch, which carried out the research, found that 46% of UK homes were due an average of £136 each in outstanding credit, and 1 in 10 homes were due more than £200 worth of credit.

However, Uswitch said when it came to getting the money back, over half of customers needed to keep chasing their supplier in order to get their refund.

How to compare and switch energy suppliers

Two houses on the same road using the same amount of electricity and/or gas can pay a significantly different amount of money for their energy. 

What you pay will depend on:

  • Your supplier

  • Your tariff

  • Whether you’ve switched recently 

Why you need to find out what energy tariff you are on 

If you have never switched, you will probably be on a standard variable rate (SVR) tariff. 

Even if you have switched you may still be on the supplier’s SVR, as you may have been on a promotional period, which is normally 12 to 18 months.

Uswitch estimates that 11m households will overpay £3.5bn in 2020 simply by being on the SVR.

Suppliers rely on the apathy of consumers staying on the same SVR tariffs to make large profits. In 2020 the six largest energy companies set their SVR’s within £4 of each other.

How to find the best energy tariff

You can save money by being on the right tariff. The cheapest deals are available if you manage your account online and opt for paperless billing. Here’s a list of the different energy tariffs available in the UK.

Standard tariffs

These are usually the most expensive option, but they’re flexible: your bill could go up or down in line with supplier price increases/decreases, and you can leave at any time without paying an exit fee.

Fixed-rate tariffs

The price of the standing charge and rate per kilowatt hour (kWh) for your gas and electricity doesn’t change for the length of the deal. 

It means you are protected from price rises – but if prices are cut you won’t benefit. If you leave before the end of the fixed rate deal, you will usually have to pay an exit fee.

Dual fuel tariffs

This is when you get gas and electricity from the same supplier. The cheapest deals are often reserved for dual fuel customers and it can be easier to deal with just one supplier.

Online tariffs

The cheapest deals are reserved for online tariffs where you receive bills and correspondence via email and submit meter readings and manage your account online.

Pre-payment tariffs

Pre-payment tariffs are an expensive option but make it easier to manage your finances because you ‘pay as you go’. 

Green energy tariffs

Green energy tariffs are rarely the cheapest, but they’re not always the most expensive either. If you opt for a green energy tariff, the supplier will usually promise to buy renewable energy generation from the National Grid equal to your energy usage.

What is the energy price cap?

If you’re on a standard variable or default energy tariff, your plan will be subject to Ofgem’s energy price cap.

Since the energy price cap was introduced in January 2019, most suppliers have set their default prices very close to the maximum cap rate.

The cap is a limit on the unit rate and standing charge that energy suppliers can charge for their standard variable - or ‘default’ - tariffs. 

  • The rate is set by Ofgem, the energy regulator, and is reviewed twice a year.

  • The current default tariff cap is set at £1,042 per year and came into effect from 1 October 2020.

  • The cap rate only applies to standard variable or default tariffs. 

  • These types of tariff are typically the most expensive plan that a supplier offers.

The prepayment meter cap

The price cap affects the 4 million prepayment customers in the UK in the same way that it affects those on standard variable tariffs. There is a separate cap for prepayment tariffs, which is reviewed independently of the SVT cap by Ofgem.

Currently, the prepayment cap is £1,070. This rate came into effect on 1 October 2020.

How to read and understand an energy bill

Energy bills are complicated and despite efforts from the regulator, Ofgem, to force utility providers to simplify bills, they remain difficult to understand.

Like most bills, you will have an opening balance. How much you owe will be any charges for the period, minus any payment you’ve made in the billing period.

Charges are made up of the amount of kWh used in the period multiplied by the rate. 

For instance, 540.4 kWh x 11p (the rate per kWh) = £59.44. 

You then add on the daily standing charge for the period, for instance 31 days at 18.01p per day = £5.58. 

On top of this VAT is charged at 5% on energy costs, so this bill total is £65.02 + 5% VAT (£3.25) = £68.27.

The main charge, the usage, may be estimated if you haven’t provided a meter reading. When you provide one, the next bill will be calculated based on accurate usage and will show the correct charges and bring your account up to date.

Common billing errors

Energy companies regularly make mistakes. 

Ofgem has launched 76 investigations into the practices of energy firms since 2009 into issues ranging from pricing errors to tariff irregularities, covering all the major suppliers and most of the minor ones too.

Common billing errors include:

  • Bills not matching accurate meter readings

  • Bills not added up correctly

  • Suppliers refusing to refund credit balances 

  • Suppliers applying the wrong tariff details to accounts 

  • Duplicate charges where suppliers apply their own estimated meter readings and the ones customers have actually supplied

If you think your energy supplier has made a mistake, contact them and try and get it resolved. 

If they don’t rectify the mistake to your satisfaction, then complain to the Energy Ombudsman.

How to keep your energy bills low

Energy bills can be expensive, but there are a few things you can do to keep your costs as low as possible.

Pay by direct debit: It’s usually cheaper and means you won’t have to worry about missing payments.

Use less: It sounds obvious, but the less energy you use the lower your bills will be. There are plenty of tips and tricks you can use to cut your consumption. We’ve listed some from the Energy Saving Trust below.

Make your home more eco-friendly: Better insulation, a new boiler and solar panels are some of the way to make your home more energy efficient. There are lots of options out there which could help you save up to £250 per year. Read on to see if you’re eligible for a government grant.

Turn down your thermostat: Just reducing your thermostat by 1°C could cut 10% off your heating bill – it usually saves around £75 per year.

Turn off the lights: If you nobody is occupying any rooms in your house, remember to turn off the light! 

Fill up your washing machine 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: When you are making a cup of tea, you should just boil enough water for one cup.

Use energy saving light bulbs: 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 a bulb.

You can out what home improvements you need with a Home Energy Check from the Energy Saving Trust.

Struggling to pay your energy bills?

Not being able to afford to heat or power your home can be worrying. However, there is help available if you’re struggling.

The government has launched an emergency package with energy suppliers to make sure you can heat and light your home.

Find out who your gas or electricity supplier is, and their contact details, on a recent energy bill. If you’re still not sure, see Ofgem’s website.

16 December 2020