Smart ways to cut the winter bills

Published 22nd Sep 2009

Moving over to a smaller provider before it's time to turn the heating back on could give you a warm glow

Householders fed up with costs or service from the big six energy suppliers might want to switch to a smaller rival, as the cheapest energy tariffs on the market now come from two of the tiniest players.

Just in time for winter, First Utility and newcomer OVO Energy have both launched online tariffs that undercut the bigger players' equivalent energy plans by up to £60 a year (based on typical household consumption).

First Utility, which had previously only been offering two-year contracts tied to a Smart Meter, has brought out iSave, a tariff that makes it the cheapest supplier in the UK. The average household bill on iSave comes out at £967 a year, compared to the UK typical average - offline - bill of £1,243 a year.

The tariff is dual fuel, which means you have to take out both gas and electricity but without a contract, so you can switch at any time. There are further cost-saving incentives: after 12 months of direct debit payments you get an annual 12.5% dual fuel discount and you also receive a £5 credit each quarter provided you give First Utility at least one gas and electricity meter reading in that time.

First Utility started the year by offering its unique Smart Meter tariff to households across the country. Smart meters - which the government plans to install in all properties by 2020 - take accurate digital readings of energy usage. Unlike conventional meters, First Utility's meters measure electricity usage every 30 minutes (daily for gas) and you only pay for what you use.

The company could not keep up with demand, though, and last month decided to limit its Smart Meter tariff to customers in the Midlands. In this area, customers won't be able to sign up to iSave.

"The idea is that smart meters will be rolled out nationally in the new year, starting where the concentration of iSave customers is greatest," says Darren Braham, financial director at First Utility.

The Smart Meter tariff prices are the same as iSave, but in theory bills should end up cheaper because households with a smart meter are more likely to use their gas and electricity more conservatively. So those in the Midlands would still do well to sign up to First Utility Smart Meter tariff, though they will be tied into a two-year contract with a £50 early exit penalty.

The tariff from newcomer OVO Energy is only a couple of pounds more a year on average than First Utility's but is a fixed price deal, meaning the price you pay per month stays the same regardless of fluctuating energy prices. If you leave within the first 12 months you must pay a £60 exit fee (£30 per fuel).

The general expectation is that energy prices will fall before the end of the year, meaning OVO customers could miss out. "The last time wholesale energy prices were this low was back in March 2007, but the standard rates that customers pay were 20% lower, so we should soon see prices come down," says Joe Malinowski of theenergyshop.com.

However, last week regulator Ofgem warned that prices are likely to rise further next year, and Ashton Berkhauer, head of home services at uswitch.com, points out that the OVO tariff does give customers certainty. "You know what you are paying for the year," he says.

The tariff will also appeal to more eco-aware households as 15% of the energy comes from renewable sources. For those particularly concerned about this aspect of their supply, OVO offers a 100% green electricity tariff at a slightly higher cost.

OVO is a new player in the market, and some new, smaller players in the energy market have come to a sticky end in the past couple of years. However, Berkhauer says this shouldn't put people off.

"You will never get cut off if a supplier goes under," he says. "Your supply is automatically taken over by British Gas for gas and the incumbent supplier for your area for electricity [such as Scottish Power in Edinburgh, for example]."

The other good deal on the market is Go Direct from Scottish & Southern, so named because it is only available through S&S and not through price comparison websites.

Again, the tariff is an online dual fuel plan and, although prices are higher than First Utility and OVO Energy, until 18 October the company is offering a £40 joining bonus - around the amount they would have paid a switching site in commission. This brings the cost down to almost exactly the same as First Utility and OVO but the deal is only worth signing up to before the £40 sweetener is taken away.
Three steps to tariff-switching-heaven

• Decide which company you want to move to or, if you are not sure, compare prices on at least one of the price comparison websites. The Observer and the Guardian have their own switching website at www.money-deals.co.uk. The cheapest deals are always online only, paid by monthly direct debit.

• If you change tariffs using a switching website, it will handle the transfer for you. You won't pay the website anything as it takes a commission from the company you are switching to.

• Be prepared to wait around six weeks for the process to be completed. Make sure you take a meter reading on the day you change supplier and give it to your new supplier.

Source: ' Guardian '

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