E.on is to hike energy prices by an average of 3.7% from 18 January, becoming the last of the big six power suppliers to announce an increase in its charges.

EDF, Npower, Scottish and Southern Energy, British Gas and Scottish Power have also announced gas and electricity price increases in recent weeks.

E.on's price hike takes into account the Government's cuts in green levies, which were announced earlier this week. (See Energy bill shake-up MSE News story.)

Direct debit customers will see a bigger rise, of 4.3%.

Now all the big six firms have announced price increases, the energy market is now almost a level playing field. So if you haven't already, look at your energy bill and do a comparison to see if you can grab a cheaper fixed deal. (Our Cheap Energy Club will help you switch and fix.)

How much will prices rise by?

Dual fuel customers on variable tariffs will see an average rise of 3.7%, putting £48 on an average annual bill. Electricity-only customers will also see bills up by 3.7%, while those who just take gas will see prices rise by 4.6%.

As these are average price rises, you could be hit with larger or smaller increases, depending on where you live, how you pay, and which tariff you have.

Unusually, standard dual fuel direct debit customers will see a hike of 4.3%, while those who pay by cash or cheque will have to pay 1.1% more.

But E.on's average rise of 3.7% is the lowest hike of any major supplier, just below EDF's increase of 3.9%. These two firms are the only big six firms to have taken the Government's green levies cut into account.

'There's now a level playing field – ditch and fix'

MoneySavingExpert.com creator, Martin Lewis, says: "E.on has had the chutzpah to hike up its prices even after the flagellation the energy companies have been given by the Government and public. It’ll no doubt argue it’s just following what the others have already done. 

"Yet the fact E.on still has room to put prices up shows the Government’s £50 reduction isn’t a cut, it’s just a diminution of the price rise.

"The silver lining is that now all six firms have hiked, we’ve now a level playing field if you do a comparison, barring minor alterations from the green levy rollback. Anyone that hasn’t checked that their deal’s the cheapest should compare right now.

"The vast majority of cheap deals on the market are fixed deals which means you can move, save money, and get a guarantee of no future price hikes. As long you plump for one without an exit fee you will be free to ditch and move to a better deal if the market improves."

Martin Lewis
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Who's affected by the hike?

All E.on customers not on a fixed deal are affected by the rise. This includes prepay customers - those on dual fuel tariffs will see a 2.7% hike.

Can I get out of my contract?

E.on says: "The exit fee for most products is £5 per fuel for one-year deals and £10 per fuel for two-year deals, though some older products differ. Customers wishing to switch to an alternative E.on tariff will not be charged a fee. No cancellation fee is applied to our Age UK tariff."

What are the big six firms' price hikes?

All six major firms have announced hikes. Four have already implemented them, with EDF and E.on to follow in the new year.

  • SSE: Prices rose by an average of 8.2% for both gas and electricity from 15 November.
  • British Gas: Prices rose by an average of 9.2% – up 10.4% for electricity and 8.4% for gas – on 23 November. (See the British Gas MSE News story for more.)
  • Npower: Prices went up by an average of 10% – 9.3% for electricity 11.1% for gas – on 1 December. (See the Npower MSE News story for more)
  • Scottish Power: Prices have gone up by an average of 8.6% – 9% on for electricity and 8.5% for gas – from today. (See the Scottish Power MSE News story for more)
  • EDF: Prices up by an average 3.9% for both gas and electricity from 3 January.
  • E.on: Prices up by an average of 3.7% – 3.7% on for electricity and 4.6% for gas – for both gas and electricity from 18 January.

Why is E.on hiking prices?

E.on says it's hiking prices to cover increased costs, adding it has incorporated cuts to the Government's green levies into its figures.

Chief executive Tony Cocker says: "There is no escaping the simple fact that any price rise is unwelcome news for customers. We know that, which is why we have held off for longer than our competitors and worked hard to keep our rise as low as possible.

"We have moved quickly to pass on the benefits of changes announced by the Government at the beginning of the week. This means we have reduced the overall level of a rise that is necessary to cover the extra costs we are seeing in some areas, as well as making sure we continue to deliver a sustainable future for all our employees and maintain our investment in the UK.

"Whilst there can be no guarantees, the likelihood of further price rises over the next 18 months caused by an increase in the cost of social and environmental obligations has receded due to the recent action taken by the Government."

Tips on cutting energy costs

Here are some top tips for saving cash on your energy bills, whoever your supplier is.

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 cheap fix (no exit penalties): Npower's Price Protector is fixed until 31 December 2017 and costs about £1,370 a year.
  • Cheapest no-exit penalty fixes: Npower's Price Fix is fixed until 30 April 2015 and costs about £1,200 a year. EDF's Blue+Price Promise is also fixed until 30 April 2015 at £1,210 a year.
  • Cheapest fixes: E.on has a one-year fixed tariff at £1,180 a year with a £5/fuel exit fee, and a one-year cheap fix for over-60s only also at £1,180 a year with no early exit fees.

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. 
  • Check if you can take the fixed deal you're after to a new home if you move.

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 fix?

A. Yes. But only with British Gas and the limited competition means here the cheapest fixes are far from cheap. Its longest fix, which lasts three winters (till March 2016) may turn out to be a good deal if prices rise hard, but it's a tough call as you pay a lot more now.

If you're looking at non-fixes, while those on standard deals should save, you risk moving to a firm that'll soon hike. So you may be best waiting until all have hiked, so it's a level playing field to compare. You can compare prepay tariffs using our Cheap Energy Club.

It's also worth considering shifting to a billed meter, if your credit score allows. For how to do this cheaply, see the Cheap Prepay guide.

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.

Additional reporting by Marcel Le Gouais and David Puddicombe.

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