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MoneySavingExpert.com » Utilities & Phones » Cheap Gas & Electricity: Time to Switch & get cashback

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Questions & Answers

Picking the right tariff

Is it worth capping?

A number of energy suppliers offer what are called capped tariffs which let you lock into a fixed price for a set period (so they should technically be called fixeds not caps). Of course it's the price you pay for units of energy that are fixed, not the actual amount which still depends on how much gas and electricity you use.

All the comparison services either allow you to look at capped tariffs separately or have a section where capped tariffs are separated out wihtin the results table.

There are a number of things you should look at when considering a capped tariff.

• Can you afford a price rise?

  Getting a capped tariff is an insurance policy against prices rising, however you pay for that by the fact you're locked into the tariff for a set period.
  
  Therefore the first major thing to consider is how important price surety is for you. If you simply couldn't afford prices to rise any further then capping is a good consideration.

• What's happening to prices.
  
  Capped tariffs are traditionally prices at 10-15% more than standard tariffs, yet currently some capped tariffs are actually the cheapest out there.
  
  This is likely to be because energy providers are factoring in future price cuts and of course those on capped tariffs won't benefit from those. This means capping isn't a no brainer, it is possible you might've found it cheaper not to cap - but then of course you lose the protection if prices were to rise.
  
  Yet predicting long-term price changes of gas and electricity is impossible; it's based on wholesale energy prices, which are just as volatile as the stock market. Add to that competitive pressures and regulation and it's not easy.
  
  
• Watch out for exit fees.

  Some providers charge exit fees if you leave before the fix ends, so this is a long term decision. If prices drop very steeply it can be worth ditching and switching if the savings made will dwarf the penalty.
  
  Don't worry about moving house though, nearly all providers will allow you to take your existing tariff with you when you move though do double check for specific tariffs.

• How long to cap for?

  Again this depends on how much security you want, fixes vary between 1 and 3 years usually. Longer caps will be slightly pricier but offer greater security, and if prices rise steeply after a few years you could've seriously benefitted.
  
  Then again it's more difficult to predict long term trends. In 2007 and 2009 prices fell during the year in 2008 they rose very steeply.

Thus whether to cap or not is often more about your own finances than anything else; the key question is 'how much surety do I want?' If peace of mind is important as you're on a very tight budget, then a price cap would enable you to at least have surety of knowing the payments won’t rise (provided usage stays the same). Better to end up having paid a wee bit more than be pushed over the brink.

What about over 60s tariffs like Staywarm?

A. Any home with at least one resident aged over 60 can access E.ON's special Staywarm dual fuel tariff, which sadly isn’t included by the comparison sites. Uniquely, the bill doesn't depend directly on the energy specifically used, you pay a fixed tariff over a year. This gives peace of mind that turn the heat up and you won't pay more.

While it isn't as competitive as it was at launch it's still worth checking out if you have someone over 60 in your household. For more read the Staywarm additional briefing.

What about green energy tariffs?

A. Luckily green tariffs are now almost commonplace; most suppliers offer them. Green tariffs are defined by the fact that they're either ecologically produced or a proportion of the money is put towards ecological sources.

Yet this is one area where going green and saving money diverge, so it really is a question of your personal politics. The cheapest green tariffs cost more than the cheapest standard tariffs.

However if you can afford to go green, then it's a help to the environment, and if you do, then you can still compare green tariffs, all of the main comparison services allow you to do this.

How often can I switch?

A. There is an open market rule, which means you can switch as often as you like (barring exit penalties on capped tariffs), though of course it's not easy and can be a hassle. Plus it usually takes at least a couple of months for a switch to take place.

It's also worth noting that while until late 2007 energy companies weren’t allowed to lock you in. The regulator Ofgem then decided that the market was competitive enough and thus companies can now require you to sign up for a year's contract. These are still almost unheard of, but do check before you sign up; it’s always better to have the freedom to ditch and switch.

It said I'd save but I pay more?

A. While it sounds strange, you may save money even if your bills go up! In a period of regular price rises, switching often doesn't mean you actually pay less, though the comparison services will tell you so.

The point is if you’re saving 10% when all energy prices are increased by 20%, you’ll still pay more than you were, yet less than if you hadn’t switched.

A door to door saleperson said they'd lower my direct debit?

A. This is a nasty sales trick. They offer to cut your monthly outlay by lowering your direct debit, yet that DOESN'T mean you pay less. You should always compare on rate. Lowering your direct debit just means less outlay each month, but you'll need a massive catch up at the end of year, and could owe it serious cash. See the Fight energy direct debits guide for more.

More about comparison services

How do comparison sites work?

A. The cheapest supplier for you is calculated by a complicated algorithm which depends on where you live, and the quantity and type of energy you use. Web and phone based comparison services do this for you.

Just plug in your address and usage (use the Kilowatt hours on the bill rather than the cost to improve accuracy) and they tell you which supplier is cheapest. Yet even if you don't have a bill or have just moved in, most comparison services can still estimate for you.

How do they earn their money?

A. Comparison services are paid between £30 and £60 per switch from the energy companies; in other words they're referral businesses. In itself this isn't actually a problem, as it doesn't add costs to the consumer, plus the official watchdog Consumer Focus has an accreditation system for website (not phone) services, setting minimum standards.

Yet these are commercial beasts, and thus there are differences between them; in functionality; inclusion of niche players and the treatment of ‘initial discounts'; and some concerns that one or two tweak results at the edges for their gain. Yet overall, it's better to use them, than to simply listen to the energy companies when they tout ‘we're cheapest'.

Why do they only pay cashback via this site?

A. In the early days of the site, back in 2004, a comparison service boss asked me, “how can we be your top pick?” Flippantly, I replied “pay customers some of your cut!” and surprisingly it agreed to a trial, but only for users of this site, so as not to cannibalise its existing custom.

That was the start, and as this site's grown, with now over 7 million users a month, they all want a piece of the pie; hence each year there’s a price war to be the site’s top pick cashback provider.

Yet still in the main it's only links from the site, or for those who use the phone service and quote the deals here. If you go direct you get exactly the same service but without the cashback.

Why do I get different results from different energy comparisons?

A. It's quite common to use different comparison sites and get different results. While it can be annoying, not much can be done to standardise it. The main reasons it happens are:

• These sites make a number of assumptions.
  
  If you haven’t entered Kilowatt hours, which is the most accurate way, then just giving a past bill can’t actually tell the comparison sites your exact usage, so they each make some assumptions to work it out. Slight differences in those assumptions can impact the overall recommendations.
  
  Even if you do put Kilowatt hours in, other assumptions are made, as some sites add in seasonal usage weightings and more slight variances due to how the calculations are done. Of course it's very frustrating, but ultimately it's likely the actual difference in what you pay will be small.


• Check you’ve selected exactly the same current tariff.
  
  Annoyingly suppliers often list many almost identically named products for each provider – something that should be cracked down on – so it's important to check when you were saying who your current company is – that you got it exactly right.
  
  
• Was the difference just in the amount saved?
  
  If the tariff you should switch to is identical, but the saving isn't this is less of a worry, it's far more likely to be about assumptions.

What about when there are genuinely different answers?

That's very annoying, and really it shouldn't happen, but occassionally it does. The only way to get PERFECT accuracy is get a spreadsheet out and do your own comparisons – but unless you’re a maths whizz with a lot of time that’s virtually impossible.

The actual answer here is to remember and hope the differences are only at the margins so overall if you’re making a savings it's still a good move.

Why do we suggest comparison sites if this can happen?

The alternative is listening to the guy in the supermarket or knocking at your door trying to flog you a new tariff and they’re just salespeople. While the comparison sites are far from perfect, they are accredited by energywatch and those standards mean the differences are small.

In 2005, I took the decision ( having made a big fuss about it), that ultimately it's more important to encourage people to save big money by getting the best tariff easily and switching at the right moment than to berate small differences between comparison sites.

Thus I accepted comparison sites are the least worst way to do it. Overall they provide a good service and tell you roughly the cheapest provider… it's my hope they’ll be improved, but they’re much much better than sticking with an expensive supplier and watching prices rise.

Independent Gas Transporters

Are you supplied by an independent gas transporter?

A. Independent gas transporters (IGTs) are often used by constructors instead of Transco (National Grid) in new build properties as they charge less to fit pipes. One in 20 people are supplied by them instead of Transco.

If that’s the case you may have to pay £30-£40 more on top of any comparison quote as the gas provider uses both pipe's so must pay Transco and the IGT to supply gas to your house; and this charge is passed directly on to you.

How to tell if you have a independent gas transporter

A. If the MPRN (the meter point reference number, unique to your house) on you bill is 10 digits long and starts with 74 or 75 this means you are supplied by an independent gas transporter. If you're not sure, Energylinx has a useful tool you can use to check.

Is it still worth switching?

A. Switching at the right time can save you around £150/year, so you should still save. All providers, except British Gas, charge if you have an independent gas transporter; so simply do a comparison and if it's less than £40 compared to the cheapest provider opt for it instead. Occasionally it may mean you can’t switch to certain suppliers.

Who to complain to?

Who should you complain to if things go wrong?

A. First of all contact your energy provider. Keep a note of all the dates, times and people you speak to, if calling doesn't work, write a letter. Then if you've escalated it as far as you can and still don't have an adequate response contact the Energy Ombudsman. It will resolve complaints about billing, transfers, service and sales issues and can ask provider's to reward compensation up to £5,000 (though less is usual).

You can only complain to it if your energy company is a member which currently includes: Centrica, EDF, Scottish & Southern Energy, Eon, Scottish Power and npower. Ombudsman complaints are a no risk system, so if you've got an issue go for it. You can ring, write or complain to it online.

For a London family who've never switched, are billed quarterly, annually spending £1,200 on gas and £900 on electricity, the cheapest equivalent service would save them £265 a year including cashback. If the family also started paying by Direct Debit, then the saving would be £450 plus of course there's cashback.

	Gas	Electricity	Total	Cashback	Total saving
Current – billed	£1,200	£900	£2,100	N/A	N/A
Switching to the cheapest
Billed - Dual fuel	£1,895		£1,895	£30	£235
Billed - Standalones	£1,088	£777	£1,865	£30	£265
Direct Debit - Dual fuel	£1,694		£1,694	£30	£436
Direct Debit - Standalones	£1,036	£645	£1,681	£30	£449

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