Shopping around for energy deals has never been a popular pastime. For most of us, spending hours making sure our fuel bills are as low as they can be tends to languish towards the bottom of the to-do list. Of course, there are wonks out there who enjoy the satisfaction of knowing they’ve scoured the internet to find the cheapest price possible, but the energy crisis has denied even these select few the pleasure of deal hunting.
Pre-crisis, energy suppliers were fighting it out in a competitive marketplace. Companies were keen to lower their prices and offer juicy deals to tempt customers away from rivals. Then, as energy prices began to surge, this came to a halt. Soaring wholesale gas prices led suppliers to withdraw cheaper offers and tariffs drew level around the mark set by Ofgem’s Price Cap.
Since the introduction of the Government’s Energy Price Guarantee (EPG), suppliers have all charged the same for default and standard variable deals. In short, shopping around has been almost pointless.
At last, some good news is on the way. Falling wholesale prices are forecast to start driving down bills from July. The even better news is that you don’t need to wait until then.
The first reason for this is that new companies that can save you money are emerging. This option involves getting a third party - my own firm Nous is one - to handle your bills for you, which can lead to savings.
Secondly, we’re starting to see the return on fixed energy deals. Last month, Ovo was the first energy company to offer a one-year fixed deal – for existing customers only – that was cheaper than the EPG. The tariff works out at £2,275 a year for the average dual fuel household. This is nine per cent less than the EPG, under which the typical household pays £2,500 a year. On the face of it, that looks like a healthy enough discount.
But for almost everyone, the Ovo deal would end up being more expensive than sticking with your current tariff and waiting for prices to fall in line with forecasts. The exception is for households with extremely high energy usage – we’re talking levels at around triple the average consumption.
Unless you live in a vast mansion with a swimming pool and a hot tub or two, this probably won’t apply. For these fortunate few, it would be worth switching to the Ovo deal to bring down their bills in the short term, then paying the exit fee of £150 to switch again when prices drop.
Of course, this involves a fair few sums to work out if you can save, plus the added hassle of cancelling contracts and switching providers. Handing this process over to a household bill managing service instead means all the savings but none of the paperwork.
When it comes to fixed deals, my advice would be to hold out. Bills are set to reduce from July as tumbling wholesale gas prices trickle down to households. Fixing too hastily could easily end up being more expensive.
We also need to be realistic about the energy crisis opening the door to miss-selling. People are desperate to bring their bills down, which makes them vulnerable to offers that aren’t actually in their best interests. Ofgem and the Government must be hypervigilant to this and stamp it out wherever it occurs.
As inflation continues to stick in double digits and interest rates look set to rise again, ordinary families are struggling to keep their heads above water. Amid all this dismal news, the savings we’re now starting to see on energy could finally offer some respite.
