Just over three million customers will be hit with gas and electricity price rises from 1 December, after Npower became the third of the big six energy firms to announce a price rise.

Scottish and Southern Energy and British Gas have already announced gas and electricity price increases (see the SSE and British Gas MSE News stories).

It's been rumoured over recent weeks that all big six energy companies will be hiking prices.

How much will prices rise by?

Prices for 3.1 million Npower customers will rise by an average of 10% – up 9.3% for electricity and 11.1% for gas from 1 December. (Join our free Cheap Energy Club to get the best tariff for you.)

This represents a £139 increase on a typical yearly dual fuel bill paid by monthly direct debit, from £1,258 to £1,396.

As these are average price rises, households could be hit with larger or smaller increases, depending on where they live and what tariff they've got.

Martin Lewis
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Who's affected?

All Npower customers, barring over 500,000 fixed price users, will be hit by the price hikes. This includes prepay customers.

Can I get out of my contract?

If you're on a variable tariff there's no exit fee if you want to switch to another tariff, unless you're on Npower's Energy Online April or May or August 2014 tariffs.

However as a result of the price hikes, Npower is waiving the exit fee on these tariffs if you let it know you're switching elsewhere within 30 days of receiving notification of the price rises.

Will other providers follow?

The problem for households is energy providers are like sheep. Where one goes, the others follow. So it's likely other providers will announce price hikes in the near future.

Why is Npower hiking prices?

Npower says the main drivers behind the price rises are increases in delivering energy to homes, fulfilling Government schemes and increases to the cost of buying energy wholesale.

RWE Npower chief executive Paul Massara says: "I know that any increases to household bills are always unwelcome, and this is not a decision that we have taken lightly. We will continue to take steps where we can to reduce the impact of the external influences on energy bills.

"We only aim to make around 5 pence in every pound (5%) in our retail business which we feel is a fair return for delivering reliable energy to consumers and for the risks that we bear."

Npower last upped its prices on 26 November 2012, when gas rose by an average of 8.8% and electricity went up by 9.1%.

Consider fixing

Martin Lewis, creator of MoneySavingExpert.com, says: "This is proof that the Prime Minister was wrong when he bluntly advised people simply to switch away from their current provider – in a price rise environment, that isn't fit for purpose.

"In fact it can be dangerous, which anyone who switched last week from British Gas to Npower can attest to.

"Instead, urgently do a comparison and consider getting a cheap fixed deal to see if you can save. Someone with typical bills on a standard tariff could save over £200 per year when fixing for 18 months, or lock in no price rises for four winters and still save £80/year."

Tips on cutting energy costs

Here are some top tips for saving cash on your energy bills.

Q. How do I prevent price hikes?

A. Many on standard tariffs can save and get no-price hike certainty with a cheap fix. But don't just call your provider and ask, as that risks locking you in at high cost. You need to get the market's cheapest deal.

However, this isn't all about price – consider tariffs with no exit fees, so you have the freedom to leave if things don't go as predicted.

Below are the current top deals (not for prepay customers), compared to the average dual fuel user on a standard tariff who pays £1,420/year.

  • Longest fixes (no exit penalties): Npower's Price Protector tariff is fixed until 31 December 2017 and costs about £1,370 a year. Meanwhile EDF's Blue+Price Freeeeze is fixed until 31 March 2017 and costs about £1,340 a year. So with both tariffs you get no hikes for four winters.
  • Cheapest no-exit penalty fix: EDF's Blue + Price Promise is fixed until until 31 March 2015 at £1,180/year.
  • Cheapest fix: First Utility's iSave v9 is fixed longer than EDF's Blue + Price Promise, until April 2015, and at a slightly cheaper £1,170/year. But it could hit you with up to £60 in exit penalties.

Q. OK, So do I just switch to one of those?

A. Hold your horses, there are a few more things to know first.

  • ALWAYS do a comparison. Who's your winner and how much you can save depends on your usage and region. Don't just rely on the tariffs above – you should do a comparison – our free Cheap Energy Club will compare the market to give you the cheapest tariff tailored for you.
  • Is it worth fixing? If the comparison shows you can save and get certainty, it's a no-brainer. Others on a cheap tariff may need to pay more to fix. Only a crystal ball will show you whether this is right or wrong. So you need to decide based on your attitude to prices. The more big price rises would hurt, the more seriously you should consider fixing.
  • You could be due a lump sum. If you're in credit when you switch, your old provider needs to give you cash (put it aside, winter's coming, so usage is higher). If you're in debt when you switch, if you're on prepay, you can switch if the debt's £500 or less. If you're on a credit meter, it varies by supplier and payment method. British Gas and Scottish Power told us you'd need to pay off the debt before switching away. The other big six suppliers may let you switch then pay it off. 
  • You can take your fix if you move. All the above fixes are portable (check others to see if you can take them to a new home).

Q. Isn't switching a big hassle? I don't like change.

A. No. Switch, and you keep the same gas, electricity and pipes. Only service and, crucially, cost changes. Yet it will take two months to switch across, which is why doing it now before big winter bills is so crucial. These days, switching is pretty simple, but, of course, for some there can be hassles.

There are two types of tariff to choose from. A variable tariff where prices can rise, and a fixed where they don't. Variables can be cheapest, but if you want certainty, for not much more, you can prevent price hikes.

Q. Anything else I can do to cut my bill?

A. If possible, pay by fixed MONTHLY direct debit and you get a discount of up to 6%. Though always do regular meter readings for accuracy, as your bill's estimated.

Q. I've heard some people switch to a cheaper price but have a bigger direct debit.

A. Direct debits are based on an estimate of your usage. Some find they switch to a cheaper tariff, but their direct debit rises. This is usually because the new firm over-estimates, or the old one under-estimates.

If it's too high and means you overpay, you'll get the money back later. If it's a problem, you've a right to ask them to lower it.

Q. I'm on a prepaid meter. Can I switch?

A. Yes. While some of the more competitive deals and fixes aren't available, it's still possible to save up to £70 a year. Do a comparison first, and also consider checking if you can move off prepay to a normal billed meter for free.

Q. All this is fine but I can't afford to pay my bill now, what can I do?

A. If you're seriously behind, or in general financial hardship, you may be able to get grants to help. Call the Home Heat Helpline on 0800 33 66 99.

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