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Top tips to beat the 2013 / 2014 price hikes


SSE and British Gas have announced price hikes. Is this just the start of a series of rises?

Absolutely. Now that the first energy suppliers have started the others will all follow. It is just matter of when and how much the energy price increase will be. You don't need to give an energy supplier much of an excuse for them to want to push up their prices but on this occasion they have 2 legitimate reasons - higher distribution costs and higher government imposed levies.

How quickly are other energy suppliers likely to follow?

One, maybe two, energy suppliers may want to hold out until next spring to get some positive PR. However we expect the rest to move over the coming weeks and months.

Are the energy suppliers doing this as a pre-emptive strike before Ed Miliband and the Labour Party have a chance to freeze energy prices?

No, not on this occasion. A pre-emptive rise ahead of a potential politically motivated price freeze would come in just ahead of the election. We still have that to look forward to and it might even make this one look like a warm-up. However, Ed Miliband's threat to freeze prices for 20 months has, we think, raised the issue of who is responsible for the overall level of energy prices. The energy suppliers have pushed back very aggressively blaming government policy for a good chunk of the increase in our bills, and they will certainly use this round of increases to hammer home that point. We think that Ed Miliband's energy price freeze policy may even have spurred the energy companies on to make these increases sooner rather than later.

Is there any end in sight to the price rises or will they go on for years?

For the 50-60% of energy bill that is made of up the commodity cost, that is, the wholesale price of gas and electricity, that is difficult to predict. It could go either way and will clearly depend upon ultimately what happens to global energy costs including oil prices. After many years of rising global energy prices and high volatility, wholesale energy prices have actually been basically flat and very stable over the past 12 months.

For the balance of the energy bill that is made up of distribution, metering and social and environmental charges; well that still has a few years of increases left to run. Our current expectations are that, even if wholesale prices stay flat, then average energy bills will rise by a further £50-60 a year over the next 2 years.

Is this the time to switch suppliers?

Unless you are already on a cheap long term fixed energy tariff, then you should definitely be locking away into a fixed tariff now to protect yourself not just from the increases that have already been announced but from those that will almost certainly follow in 2014 and 2015.

What do I need to get started?

The critical bits of information (apart from your postcode) that you need to get the most accurate comparison are;

1. The name of your current energy supplier or suppliers

2. Your current payment method

3. The name of your current energy tariff

4. Your energy annual energy consumption for gas and electricity in kilowatt hours (kWhs)

All sounds simple, right? Maybe not. Energy suppliers have over the last few years bamboozled us with a massive range of over-complicated tariffs all with bizarrely similar names designed almost entirely to confuse consumers. So they deliberately make it difficult to get this basic information.

You can find the name of your current tariff on your energy bill or your annual energy statement.

You can find your annual energy usage on your annual statement.

If you can't find either one or both, call your energy supplier first and get the information.

Once you have your information handy load it into our calculator which will do an all of market search for the best energy deals for you in just 30 seconds.

There are lots of fixed deals out there. How do I decide which is the right one for me?

Leaving aside customer service factors for now (we will come back to this) let's focus just on product. There are 3 main things that you need to consider when comparison Fixed energy tariffs.

1. The price

2. The fixed term

3. The exit penalty

Generally speaking the longer the fix the more expensive the tariff.

How do I decide whether to go for a cheap short term fixed tariff or a longer term more expensive fixed tariff?

Leaving aside the exit penalty and supplier service rating, it basically comes down to price and what you expect to happen to energy prices.

For example consider 2 fixed tariffs

Tariff 1 - 1 year fixed tariff costing £1200 annually

Tariff 2 - 2 year fixed tariff costing £1300 annually

For Tariff 2 you will pay a total price of £2600 over 2 years.

For Tariff 1 you will pay £1200 in Year 1 but you don't know what it will cost you in year 2.

Ignoring the time value of money, you would be worse of going for Tariff 1 if, after Year 1 you ended up having to pay more than £1400 in Year 2 (= £2600 total cost for Tariff 2 - £1200 Year 1 cost for Tariff 1).

To be worse off on Tariff 1 energy prices would need to rise by more than 16.7% in the first year (£1400/£1200 - 1).

So, in this example, if you think prices will rise by less that 17% go for Tariff 1 now. If you think they will go up by more than 17% in the first year, go for Tariff 2.

When comparing fixed tariffs with varying end dates you may find it easier to divide the difference in annual prices of various products into 12 monthly figures which then gives you more flexibility.