Understanding how the energy market works is key to reducing your annual bills and minimising your environmental footprint.
There’s still a lot of confusion surrounding energy tariffs and how to switch, which means millions of people stick with the same provider year after year. As with most financial products, loyalty is rarely rewarded, and this simply means that millions of people are paying more than they need to for the same energy that comes into their homes – essentially subsidising big corporate companies.
The situation got so bad with companies overcharging loyal customers, that the UK government had to step in to cap the amount that energy companies could charge, to stop them taking advantage of the situation. The challenge is that the price cap is set at a level that is still very high. The gap between the maximum amount you can be charged under the energy price cap and the market leading rates can be as much as around £380 for a typical household receiving their gas and electricity from the same supplier.
There are a number of reasons why people are reluctant to switch providers – often people are worried that they may have to have new pipes or meters installed if they switch supplier, or that it could mean they lose their supply – both of which are almost always untrue. The energy regulator Ofgem is so passionate about encouraging people to switch providers, that it has made it easier than ever for people to switch energy supplier.
Here, we explain everything you need to know about energy tariffs and switching.
- What kinds of energy tariffs are there?
- What does it mean if an energy tariff is green?
- Are there any pitfalls in choosing a green tariff?
- Why is it important to compare energy prices?
- How much can I save if I switch?
- How do I switch energy suppliers?
- What information will I need to provide when switching energy suppliers?
- What should I be aware of when switching apart from the annual cost and type of tariff?
- What is a smart meter?
- Are smart meters compulsory?
- What should I look for in a new energy deal?
- What are the risks of switching energy provider?
- Should I stick with suppliers I’ve heard of?
- What happens if my energy provider goes bust?
- How long does the switching process take
- What if I’m in credit with my supplier or I owe them money when I switch?
- What if there are any problems when I switch?
- How much extra will I be likely to spend on energy bills during lockdown?
- How can I use less energy?
- Are there any other ways to save on energy costs?
- What information will I find on my bill?
- Can I get a refund if I’m in credit, even if I’m not switching?
- What is a standing charge?
- What is the energy price cap?
- How do energy charges work?
- What are prepayment tariffs
- What’s a ‘personal projection’?
- Is there any government help available for energy bills?
What kinds of energy tariffs are there?
There are two main types of energy tariff – fixed and variable. A fixed rate tariff sets the price of energy for an agreed amount of time, usually at least 12 months, while variable deal prices can rise (and fall) at any time. In recent years, with increasing concern about the environment, there has been a significant rise in ‘green’ tariffs, which come in both fixed and variable offerings.
What does it mean if an energy tariff is green?
With a green tariff your supplier commits to generating enough renewable energy to cover your household energy usage.
They can do this in a number of ways. It might, for example, be through power created by solar panels, wind turbines or water.
For gas, some suppliers use power from renewable sources. So-called ‘green gas’ is made by turning plants or vegetables into biomethane. Other energy suppliers plant enough trees to absorb the amount of gas you use – a process called carbon offsetting.
Green tariffs often tend to be among the most competitively priced energy tariffs, so you often don’t need to pay more to be kind to the environment.
Are there any pitfalls in choosing a green tariff?
Even if a supplier claims to be green, it doesn’t necessarily mean all of its tariffs are 100% green. To find out the true green credentials of a supplier and the energy tariff you are buying, search on the firm’s website for what is known as the ‘fuel mix’ disclosure. This shows what the energy you receive is made up of, so for example, it might be made up of 40% renewable energy, 35% gas, 20% nuclear and 5% coal. Thankfully, there are many green tariffs that offer a 100% renewable electricity and 100% carbon offset gas.
Why is it important to compare energy prices?
Gas and electricity bills are usually one of our biggest monthly outgoings behind our mortgage or rent and Council Tax, but there’s no reward for sticking with one provider.
The golden rule is not to slip on to your supplier’s standard variable tariff – the rate consumers are moved to after an introductory deal expires – as this tends to be the most expensive type of energy tariff. Latest data from the energy regulator Ofgem shows that as many as 15m UK households are currently on their suppliers’ least competitive standard variable tariff and therefore are likely to be paying more than they need to. According to Ofgem, in June 2020, the average standard variable tariff cost £1,125 a year, whilst the annual bill for cheapest tariff available cost around £791 a year, a difference of £334.
The pipes and wires that bring gas and electricity into your house are run by the National Grid, rather than your energy supplier. This means that the energy you pay your supplier for is literally the same from one company to the next – apart from a supplier’s commitment to feeding in renewable energy to the grid.
So if the energy itself is literally the same, which means the important things to focus on are the cost of the energy and the service you get from your supplier. With energy suppliers this is not always a trade off, with some of the most competitive deals coming from new suppliers who offer great customer service too.
How much can I save if I switch?
Savings from switching to a new tariff will vary widely depending on your energy usage and your existing tariff, but as the Ofgem research shows, can amount to as more than £300 or more a year. So if you haven’t switched for a while or your fixed rate tariff is due to come to an end soon, use our energy switching service to find out how much you might be able to save.
How do I switch energy suppliers?
Apply to switch
Once you’ve found the right deal for you, our switching service should allow you to switch online via its service with a click of the mouse or touch of the screen. It typically takes less than 10 minutes to search the available deals and submit your application to switch providers. You’ll need to provide some personal details – name, address, phone number, email – as well as sign up to a direct debit to make your energy payments. Most don’t require any paperwork anymore.
Provide meter readings
When requested, you will need to provide meter readings to your new supplier so they can work out your final billing.
Settle any final bills (or refunds)
Once you’ve submitted your meter readings to the supplier you’re leaving, you’ll be sent a final bill. If you owe money, you must pay this within 14 days of receiving the bill. Your payment will be collected by Direct Debit if that’s how you’ve been paying for your energy. If you pay any other way, for example, by cash or cheque at the Post Office,
If you’re owed a refund, your supplier should pay this into your bank account or send you a cheque, again within 14 days of you receiving your final bill.
Sit back and relax...
Your new provider will take care of everything else and you shouldn’t even need to speak to your old provider, other than to settle any outstanding bills or refunds. The switch-over process can take up to 21 days but in most cases, it’s a little shorter. If you change your mind, you have 14 days to cancel from the date you agree a contract by contacting your new supplier.
What information will I need to provide when switching energy suppliers?
When switching energy suppliers, you’ll need to provide your name, email, property address and postcode and the name of your current supplier. Whilst you don’t need these to switch, if you want an accurate estimate of your potential cost savings, it’s also helpful to have the details of the current tariff you are on with your existing supplier, and the amount of gas and electricity you use each month. You can find all the information you’ll need on your energy bills or statements.
Once you have entered those details into our energy comparison service, you will be presented with a list of tariffs – there can often be a huge range of options to choose from, starting with the cheapest.
What should I be aware of when switching apart from the annual cost and type of tariff?
Check if there’s an exit penalty for leaving your existing tariff. If there’s no charge, you can move to a new supplier and tariff whenever you like, free of charge. You should also be aware that some of the cheapest tariffs require customers to sign up for a smart meter. This is often buried in the small print so it’s important to read up on your new deal before switching.
What is a smart meter?
A smart meter is a type of energy meter which automatically sends readings to your energy supplier, so no-one has to visit you to take a reading. The Government wants more households to have a smart meter in their home as it allows you to track how much you are spending in pounds and pence on a digital screen. This should help you understand your energy usage more, so that you can take steps to reduce your energy consumption and your bills.
Are smart meters compulsory?
The Government has set a target for energy firms to offer all homes a smart meter by June 30, 2025, but as yet it is not a legal requirement to have one.Originally, this target date was the end of 2020, and suppliers are being urged to do what they can to meet this deadline if at all possible.
You don’t have to pay up-front for a smart meter, instead energy customers pay for them through their energy bills.
If you don’t have a smart meter, it’s vital to take regular meter readings and submit them to your supplier. This will ensure your bills are accurate and you won’t face any nasty surprises.
What should I look for in a new energy deal?
When choosing a new energy tariff bear in mind that the very cheapest deals aren’t necessarily the best. Although the cost is important, you should also check how the supplier you’re considering moving to is rated by their customers to ensure that you get the right assistance if any issues arise.
On our energy switching service we allow users to see a supplier’s customer service rating from Trust Pilot, as well as the savings they may be able to make. You might also want to check that your new provider offers a user-friendly website, or a telephone customer service option (some don’t) if that is important to you.
Many of us are also becoming increasingly aware of our own environmental footprint, so you may want to look for a green tariff that generates its energy from renewable sources, rather than coal.
What are the risks of switching energy provider?
There’s very little risk involved in switching energy providers, and if you are unlucky enough to experience an issue, these will usually be an administrative one, such as being incorrectly billed, problems with customer service, or being moved to an alternative supplier if your provider has run into financial difficulties. You’re extremely unlikely to experience a problem that will affect your gas or electricity supply.
Should I stick with suppliers I’ve heard of?
Some of the cheapest providers are new, small suppliers whose names you might not be familiar with.
The two biggest risks from using a supplier you have never heard of are poor customer service, and the administrative overhead if they happened to go bust. It’s important to note that small doesn’t mean bad customer service, and some of the new, mid-sized energy suppliers regularly score significantly higher than their big competitors for customer service.
The best thing to do is check customer reviews and look for suppliers with good customer service ratings (Our energy switching service automatically shows a supplier’s customer service rating from Trust Pilot).
While some smaller energy companies have run into financial difficulties, there are plenty that are succeeding.. It’s also important to note that if you do end up with a firm that goes bust, your energy supply won’t be affected and the regulator will ensure that you automatically get switched to another firm. It’s likely to be an administrative inconvenience more than anything.
If you’re still not convinced, our energy switching service does allow you to only search deals available from the biggest six energy suppliers. Although, this doesn’t guarantee good customer service or the cheapest rates – it is still likely to save you significant sums when compared to staying on your suppliers standard variable tariff.
What happens if my energy provider goes bust?
If your energy supplier goes bust, any credit balance you have with them is protected and guaranteed by the energy regulator Ofgem. It will assign you a new energy supplier, so you won’t have to do anything. Your energy supply won’t be disrupted, so the only change you’ll notice is that you’ve been moved to a different supplier.
Ofgem has recently published final proposals to strengthen checks on energy suppliers, so smaller providers will have to demonstrate that they have the financial strength to take on high numbers of customers. Find out more here. The proposals are expected to come into force this winter.
How long does the switching process take
Comparing available energy deals and applying to switch supplier typically takes less than 10 minutes through our energy switching service. After that, switching energy tariffs should take no more than 21 days under rules from the energy regulator, and your new supplier should do all the work on your behalf. Your final bill from your old supplier should arrive within six weeks. It’s the same g meter- you won’t lose your energy supply – the only difference will be the cost and who you pay.
What if I’m in credit with my supplier or I owe them money when I switch?
If your final bill shows a credit, you are entitled to a refund. Suppliers must pay back any money owed within two weeks of a final bill being issued.
If you owe your supplier money, you will need to pay this within two weeks. If you pay your energy bills by direct debit, the money will usually be taken from your account automatically. If you pay a different way, for example, by debit card over the phone, or by cash or cheque at your bank, you’ll need to make sure you pay back what you owe as soon as you can, otherwise this could delay your switch.
What if there are any problems when I switch?
Sometimes, but not often, things can go wrong. Customers will now automatically receive £30 in compensation if they experience delays or mistakes when switching supplier as a result of new rules that came into force on 1 May 2020. This includes if the switch takes longer than 21 days, if your final bill does not arrive within six weeks or if a credit refund you’ve requested is late.
The regulator has a detailed guide on what to do if you would like to make a complaint about your energy supplier and if you remain unhappy with their final response, you can escalate the matter to the Energy Ombudsman. The Ombudsman will investigate the matter and if it rules in your favour will ask the supplier to resolve the issue.
How much extra will I be likely to spend on energy bills during lockdown?
Since lockdown began in March, the use of home appliances such as dishwashers, washing machines, ovens, televisions, laptops and lighting has increased significantly. Research by comparison website Comparethemarket shows energy bills are likely to go up by more than a third compared to the average use for this time of year. This equates to an average of £32 a month, so it’s worth being prepared for steeper bills.
How can I use less energy?
There are many simple ways in which you can cut your energy usage. For example, many of us leave our electrical appliances on standby when they don’t need to be. Read our article Save money on your energy bills to find other ways to reduce your energy consumption.
Are there any other ways to save on energy costs?
Aside from using less energy around the home, you might want to consider selecting a dual fuel tariff, which usually means a discount is applied. It also makes life simpler with just having one firm to deal with for both your gas and electricity.
Going paperless and receiving online bills can also help. Most of the cheapest green deals require customers to manage their account online and forgo printed bills to save paper. If you don’t have a smart meter, make sure you give regular meter readings for accurate bills.
The way you pay for your energy can also affect the overall cost of your bills. Suppliers will often offer a discount if you pay monthly by direct debit, and it’ll also ensure you don’t miss any payments.
What information will I find on my bill?
Everything you need to know is on your bill. This includes the name of your energy supplier and tariff, your energy consumption, what you’ve paid and the current balance. This will either be a credit or debit balance.
Your bill should also include the terms and conditions of your tariff including any exit penalty. If you are on a fixed energy deal, you should be able to switch penalty-free up to 49 days before your tariff ends
Can I get a refund if I’m in credit, even if I'm not switching?
Yes – it’s your money and your energy supplier is required to pay it back to you if you request it. There’s no universal way to claim a refund. Some suppliers, for example, supply an online form where you can ask for your money to be returned to you – but a quicker way might be to get on the phone and ask. If you’re significantly in credit, you can also request your monthly direct debit amount be reviewed and lowered.
What is a standing charge?
The standing charge is a fixed daily cost of providing your home with both gas and electricity. It’s charged even if you don’t use any energy. There are only a few energy suppliers who don’t apply a standing charge.
What is the energy price cap?
The energy price cap was introduced in January 2019 to limit the amount suppliers can charge those paying standard variable tariffs.
The energy regulator Ofgem sets the price for the cap twice a year, and it changes in April and October each year. In October 2020, it will fall from its current level of £1,126 to £1,042 for the average dual-fuel customer who uses a typical amount of gas and electricity and pays by direct debit.
How do energy charges work?
There are two main charges you’ll find on your energy bills. The ‘standing charge’ is a fixed daily charge which is there to cover the cost of keeping your property connected to the gas and/or electricity supply. The standing charge remains the same regardless of how much energy you use. Some plans don’t have a standing charge, and in this case it will still be included on your bill, but shown as zero.
The second is the ‘unit charge’ which is the cost you pay for each unit of gas or electricity you use.
What are pre-payment tariffs?
Pre-payment meters are essentially a ‘pay-as-you-go’ way to get your energy.
Rather than being billed retrospectively for the energy you’ve used, with a prepayment meter you pay up-front for your energy, usually by adding credit to a key or card which you then slot into your meter. If you pay by a key or card meter make sure you check the best deals available for pre-payment rather than standard meters.
While pre-payment meters are typically the most expensive way to pay for your energy, they do offer total control over what you spend. It may be possible to change from a pre-payment meter to a standard energy meter, but you’ll need to contact your energy supplier to see if you’re eligible to do this. Bear in mind that there may be a charge to install the new meter.
What’s a ‘personal projection’?
Your personal projection can be found on your energy bill and is an estimate of your future energy costs over the next 12 months, based on your current energy plan and its prices.
Is there any government help available for energy bills?
Yes, there are several discounts available which may help with heating bills if you’re on benefits or if you’ve reached a certain age. You can find out more in our article Are you eligible for help with heating costs? The government’s energy grants calculator can help work out whether you’re eligible for the Warm Home Discount scheme or Winter Fuel Payment.
Have you switched and saved? Or are there any other energy switching questions that you’d like to see answered above? We’d love to hear from you! Email us at [email protected] or leave a comment below.
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