Energy Bills: Is It Beneficial to Compare Options?

Great Britain’s new energy price cap of £1,738 takes effect on January 1st, but there are still opportunities to secure more favourable deals.

The new energy price cap took effect on January 1, 2025, set at £1,738 per year, which is a 1.2% increase from the previous three months. This cap applies to standard tariffs from energy providers and is based on a typical household’s gas and electricity usage paid via direct debit. However, most households will see different amounts on their bills since they depend on individual consumption.

Do I have to pay the standard tariff?

No. At the beginning of the energy crisis, energy providers found it unsustainable to offer rates below the price cap, leading several companies to go out of business and causing the switching market to nearly collapse.

Now, however, you have the opportunity to secure a better rate than the default option. There are both fixed and variable tariffs available at lower rates, and with the price cap expected to rise again in April, you could lock in rates below spring’s prices.

Elise Melville, an energy expert at the price comparison website Uswitch.com, highlights that there are “significant savings” to be had. She explains that “the average household could save up to £148 per year compared to the January price cap by switching to a 12-month fixed deal.” This saving is part of the Big January Sale – Fix’d Dual v1.0, offered by a company called Outfox the Market.

Elise Melville mentions that customers in debt may still have the option to switch energy suppliers if their unpaid bill is less than 28 days old. If the debt is older, they will need to settle their outstanding balance before making a switch.

However, she advises: “Even if you’re in debt, it’s worth checking if you can save by moving to a new deal with your current supplier, which could help you lock in lower rates.”

How Can I Find a Better Deal?

The simplest method is to use a price comparison website such as Uswitch, GoCompare, or The Energy Shop. These platforms typically gather extensive information from suppliers, requiring you to provide minimal details to receive a quote (you might be surprised by how much data is collected).

After entering your usage details and selecting the type of energy you want to compare—usually both gas and electricity—and your payment method, you will be presented with a list of tariffs. This list will display the cost for your current energy usage, the type of deal (fixed or variable), and the duration of the contract. A fixed tariff means the cost per unit of gas or electricity remains constant, although your overall bill may still fluctuate based on your usage.

Additionally, you will be informed about any exit fees, which are charges you must pay if you decide to switch suppliers before the end of your contract. These fees typically range from £25 to £100 for both gas and electricity.

By default, comparison sites usually display deals from providers that offer them a commission when you switch. However, you should be able to access a comprehensive list of all available offers by using filters that allow you to view the entire market.

Currently, some of the cheapest tariffs include a variable deal from Home Energy and fixed tariffs from Outfox the Market. These providers do not operate through switching sites, so you will only see their offers if you choose to view all deals. To switch to either provider, you will need to contact them directly.

How Should I Choose?

Emily Seymour, the energy editor at the consumer group Which?, recommends: “You should compare what your monthly payments would be on a fixed deal with what you’d expect them to be if you remain with the price-capped variable tariff to determine the best option for you.

“As a rule of thumb, we’d recommend looking for deals cheaper than the price cap, not longer than 12 months, and without significant exit fees.”

Additional Considerations

• Default Tariff: If you are on the default tariff, you should not incur an exit fee when switching suppliers.
• Recent Switches: If you have recently switched energy providers, verify that you won’t face a penalty for moving again. If there is a penalty, ensure that the savings from switching outweigh the cost.
• Meter Readings: For those staying with their current supplier, it’s important to submit a meter reading this week to avoid being charged the higher January 2025 prices for energy used at the lower December 2024 rates. If you do not have a smart meter, manually take a reading and submit it promptly.

By following these steps and considering expert advice, you can potentially secure a more favorable energy deal and reduce your annual costs.