With six million households already on the list of the fuel poor, Britain is braced for another bout of steep hike in energy prices
By Jeremy Gates
Although only two of the big six suppliers of gas and electricity have so far confirmed huge price rises - as steep as 35% for some unlucky gas customers of British Gas (BG) - nobody expects that to be the end of the story.
In the coming weeks, the remaining four will show their hand, after noting perhaps, that stonking rises so far were accepted with resignation rather than outright hostility.
To date, the winners in the fearsome energy price spiral are canny consumers who took a fixed price product early in the summer. Once BG confirmed its 35% rise, so many people tried to buy into fixed price energy products that three rival suppliers - Scottish Power, E.ON, and nPower - had to scrap their products.
With widespread fears of another round of price rises in early-2009, fixed or capped-rate energy plans which usually run for a year to 18-months, remain tempting even though they are now available at increased rates.
How should canny consumers play it from here?
For the six million households accepted to be in 'fuel poverty'- more than a tenth of income going on fuel bills - a Government rescue package is expected to be unveiled soon.
Everybody else, says Geoff Slaughter at online price comparison service uSwitch.com, needs to remember three basic guidelines to energy bills which rarely change.
"The one invariably true fact is that consumers who sit tight and do nothing almost always end up paying more than necessary.
"Potentially, consumers who have never before switched suppliers can save as much as £325 a year", he says.
"Similarly, those who pay by cheque on receipt of a bill - about a third of all customers - could instantly save about £80 per year, by switching payments to monthly direct debits, calculated on their consumption patterns.
"Thirdly, if we assume that overall rises in the present round will come in around 30-40%, consumers who switch their payment system completely online could expect to wipe out all, or at least a large part, of that increase."
uSwitch figures show that average online dual fuel energy bills for a standard house currently come in around £893 per year - against £1,127 for consumers paying quarterly bills on standard bills.
Slaughter says some suppliers offer a tariff to consumers who simply apply online, and then allow them to operate their account in the usual way.
Others - including the BG Click Account - insist the account stays totally online, with consumers supplying meter readings and accepting paperless billing.
At rival price comparison site www.moneysupermarket.com, utilities manager Scott Byrom tips Scottish Power's Fixed Price Energy 2009 tariff, with prices fixed until September 2009, as a good buy. This week, Scottish Power stepped up the competition by cutting charges on this tariff, so an average household on dual fuel would pay £1,094 per year.
"However, the online products from various providers - including BG Click Energy 5, npower Sol12, E.ON Extra Saver 8 and Scottish Power's Discounted Energy - are all significantly cheaper," he says.
"In all cases, consumers have no protection against rising prices, but online tariffs would have to soar 35% before September 2009 before they cease to be the best value option."
Byrom says BG's fix until September 2011 has attractions, despite BG upping the price by about £100 per year. It means an average annual price of around £1,250 for a duel fuel consumer in a typical family home.
Byrom says: "The BG fix until September 2011 has been removed from price comparison sites, possibly because demand is so heavy, but is offered direct by BG.
"It is slightly more expensive than the best deal from Scottish Power, but there are solid attractions in being locked in for three years ahead."
However, Byrom points out that fixes and capped rate products usually involve termination fees, up to £100 with BG. By contrast, online tariffs usually impose no lock-ins, no termination fees and allow consumers to close them after 28 days to move to an alternative products.
Byrom will also watch Scottish and Southern closely in the coming weeks because of its promise to be the first to decrease prices and the last to increase them.
Slaughter and uSwitch.com are less impressed by current fixed rate energy plans on offer after sharp price rises in recent weeks.
"Both BG and EDF fixes are now nowhere near as cheap as they used to be.
"For example, BG's dual fuel fix, paid by direct debit, costs about £1,240 per year for an average home. The current average standard plan from rival suppliers, which haven't yet increased prices, is still about £280 below that - at £963 - if paid by direct debit.
Slaughter thinks it is unwise to assume prices will necessarily keep rising: "Only a year ago, we were talking about prices falling.
"It is really difficult to take a long-term view in the current situation, but all the indicators suggest that prices will continue to go up. Those consumers most active in this market will get the best value out of it.
"As a general rule, consumers who want peace of mind and the security of knowing how much they will pay should look for a fix. Customers who can cope with regular increases should take the risk involved in going for cheaper tariffs, always taking care to pay by direct debit."
:: INFORMATION: www.uSwitch.com (0800 093 0607); www.moneysupermarket.com (0845 345 1296).
:: HOW TO CUT ENERGY COSTS
1. Start switching suppliers: half the households in Britain who have never switched may be paying 30% more for fuel than necessary.
2. Consider capping to bring consistency to monthly spending.
3.Check appliances: some guzzle electricity.
4. Check your meter regularly - energy suppliers are only legally obliged to read a meter once every two years - and take a close looks at bills on an ongoing basis to avoid excess charges.
5. Don't inherit somebody else's supplier - look for a better tariff when you move in.
6. Shop around on comparison sites - but some sites don't cover all six major suppliers. The watchdog Energywatch (0845 906 0708 and www.energywatch.org.uk) also provides price comparisons among companies operating in your area.
Source: www.Confused.com.
POUNDNOTES
:: It isn't all gloomy news on the mortgage front, according to website mform.co.uk, which says rates on the most competitive deals are on average just 0.74% higher than this time last year, while the Bank of England base rate fell 0.75% to 5% over the same period.
mform.co.uk says the average best buy mortgage deal costs 6.34%, costing anybody with a £150,000 mortgage an extra £60 per month. Two year fixes are up by an average 0.87% to 6.38%, while variable trackers are up by 0.41% to 6.15%.
However plenty of new products cost less for customers sitting on a sizeable chunk of equity.
Online bank first direct offers a fee-free offset base rate tracker at Bank of England base rate plus 0.99% - currently 5.99% - for remortgages only, which particularly favours borrowers holding savings which earn interest to reduce monthly repayments. Minimum loan size is £30,000.
New packages from Newcastle BS include a 5.65% fixed rate loan until October 2010 (again with an offset facility if required by savers) and a 5.60% fix until October 2013, both with max loan-to-value (LTV) of 75%.
Enquiries: 0845 600 4329.
Meanwhile, Yorkshire BS has launched a two year fix at 5.54%, with a reduced application fee of £895, alongside a two year fix at 4.89% with a 2.5% product fee, both to maximum LTV of 75%.
Enquiries: 08451 200 100 and www.ybs.co.uk.
Abbey has trimmed two and three-year fixes by 0.25%, to 5.89% and 5.79% respectively, both with max 70% LTV.
:: One year of the credit crunch means borrowers taking out 'best buy' unsecured personal loans can expect to pay £1.2bn more in interest than they would have done if they had taken out the loan just over a year ago, says uSwitch.com.
The price comparison site reckons 'table topping' loan deals have risen from just over 6.1% APR to 7.4% APR for £8,000 over four years - while some 1.39m applicants have had loan requests rejected over the same period.
On £10,000 loans over five years, rates have been pushed up from 8.74% APR to 9.04% APR.
:: Abbey Savings reckons Manchester City goalie Joe Hart, signed from Shrewsbury, was the best value in the Premiership last season, costing his club an average £2,960 per save against over £15,000 per save charged by Petr Cech (Chelsea) and Edwin van der Sar (Manchester United).
Abbey made its calculation to promote its new Super Saver account, paying 8.1% fixed for one year on minimum £1 deposits, to investors who put an equal amount or more into any Abbey investment product.
:: Although shares are bouncing all over the place on stock markets around the world, fund manager Newton Investment Management says they remain an attractive long-term investment, even after 'spectacular volatility' like the 1929 crash or the bursting of the tech bubble in 2000.
Newton chief investment officer Jeff Munroe says: "Over the long term, equity markets have proved to be a powerful way of generating income and capital growth.
"While we currently witness important changes in the contours of financial markets, investors need to consider their long-term investment horizon, particularly where savings and pension plans are concerned."
:: HIGH FIVE SAVERS:
Phone No Rate Account Period Deposit Interest paid
ICICI Bank UK www.icicibank.co.uk 7.20% (F) HiSAVE Fixed Rate 12 Month Bond £1,000 OM
First Save www.firstsave.co.uk 7.10% (F) Fixed Rate Bond One Year £1,000 OM
Heritable Bank 0845 607 1212 6.60% 60 Day Notice Issue 2 60 Days (B) £1,000 Yly
Whiteaway Laidlaw Bank Ltd 0161 833 5444 6.56% 60 Day Bonus 60 Days £1,000 Yly
Anglo Irish Bank 0845 455 2222 6.55% Seven Day Notice 2 Seven Days (B) £1 Yly
TOP FIVE BORROWERS:
Phone No Rate Period Max% Adv Fee Incentive
HSBC 0800 494 999 5.49% for two years 90% £999 Yes
Newcastle BS 0845 600 4326 5.60% to 31/10/13 75% £1,098 Yes
First Direct 0845 610 0100 5.95% for three years 80% £598
Market Harboro' BS 01858 412 250 5.95% for term 80% £195 Yes
HSBC 0800 494 999 5.99% for term 90% £0 Yes
Code:
*F - Fixed
*P - Operated by Post
*B - Operated by Post/Telephone
*T- Operated by Telephone
*W- Operated by Internet
*H- Operated by Internet/Telephone
*S- Available only to those aged 50 or over
*R- Available to those aged 60 and over.
:: Source: Money£acts - Tel: 01603 476 476 (All rates subject to change without notice)
