Reduce your energy bills
Transcript
Clare Francis: Energy costs have soared this year. Customers on British Gas's standard tariff are now paying an average of £1,300 a year for gas and electricity, and there are signs that these energy increases are really starting to cause concern for many households.
In a recent poll we carried out here at moneysupermarket.com to which over 1400 people replied, 34% said they're really worried that they wouldn't be able to afford to heat their homes this winter, and a further 23% said they're going to have to make cutbacks in order to be able to afford their bills.
However despite rising prices there are still savings to be made and millions of us could actually offset some of these increases by taking simple steps to reduce our energy consumption. Scott Byrom, who's a utilities expert here at moneysupermarket.com, is with me to explain how.
Q1: So Scott, we've obviously got record energy bills already and prices are rising again, but many people could still make savings couldn't they?
Scott Byrom: They can yes, definitely. The savings to be made at the moment are online tariffs, which would probably be the best option for consumers to consider. Obviously the demand is still out there for fixed tariffs but unfortunately they're probably out-priced at the moment - they're roundabout £1,500 compared to £850 for an online deal.
Q2: What sort of tariff are most people on?
Scott Byrom: The majority of people will still be on a standard tariff, and be paying by quarterly cash or cheque, so getting their bills through the post on a quarterly basis.
Q3: So they could save money by switching to an online tariff, but do they also need to alter their method of payment as well?
Scott Byrom: They will. The best payment method and the only one available for online tariffs is monthly direct debit (MDD). The good thing about MDD is that it includes a lot more discounts, so because it removes the administration side of the business for the energy providers, the energy providers then passes the cheaper costs onto the consumer.
Q4: How much could you save just by switching tariff?
Scott Byrom: The increases we're seeing at the moment have taken standard bills up to around £1,300 - you're probably looking at around £400 between online and standard. The only thing to mention there though is that the difference is there for the time-being, but these online prices are variable and therefore they will go up in price.
Q5: Because we haven't seen online prices go up yet have we? Obviously British Gas's recent announcement only affected the cost of its standard rates, so anyone switching to an online tariff at the moment needs to bear this in mind don't they because they could up in the near future?
Scott Byrom: The standard prices is the main one that goes up in price when an energy provider announces a price increase. In the next few weeks you'd definitely expect the online prices to then move. I wouldn't have thought the increase would be as high - maybe 10%, 15% increase - but a little bit more, taking the average bill near or around about a £1,000 a year...
Q6: So you could still save a couple of hundred quid by going online.
Scott Byrom: Yes.
Q7: What else is there? You mentioned fixed rate tariffs earlier - obviously with prices going up the temptation may be to lock into a fixed rate deal because of the security they offer - is it still worth doing or is it too late, because there aren't that many deals available at the moment are there?
Scott Byrom: It is an option, unfortunately if you were lucky enough to get on a fixed tariff you've probably got prices roundabout £1,050, £1,100 - unfortunately because these products do have limited availability, they've also increased so they're coming out onto the market, they're getting snapped up quite quickly, and therefore they've been removed from the market. Now they're around about £1,200, £1,250, so they are available. When they are available they've got limited availability and they're probably out-priced at the moment.
Q8: And what other steps can people take to reduce their energy bills?
Scott Byrom: There's many things that a consumer can do. Energy saving light bulbs being one; washing your clothes at 30 degrees Celsius rather than 40 degrees Celsius; turn your thermostat down by 1 degree Celsius; closing doors to unoccupied rooms - numerous things like that - making sure the windows aren't left open when you go out or on night lock or anything like that as well.
Q9: What about other things like cavity wall insulation and loft insulation, because in some areas there are grants available from the local councils? Is this something worth looking into as well?
Scott Byrom: I think it is, yes. Loft insulation could save the average customer £155 a year, so the cost of it if you did it by yourself would be around £200, so you could see that you claw that back just after your first year. If you paid someone to do it you're probably looking at more around £500, but there are many things, loft insulation, cavity wall insulation.
There are grants available - Energysavingtrusts website has got all that type of information on there with regards to grants that you can get.
Q10: What about energy efficiency monitors because they're available for about £40 to £50 but are they worth the money - what exactly do they do?
Scott Byrom: Basically what they do is monitor the consumption that is being used through your electricity meter, so if you put on a light you'll see the energy monitor will react to that and tell you how much energy you're using at that time.
It will allow you to enter your current unit rate as well, so it will give you an accurate reading of what you're spending at that given time, so you'll start realising things like when someone puts the kettle on or the shower - electricity will jump up all of a sudden.
The idea really is to make people more and more aware of their consumption and to see ways that they can reduce their energy bills.
Q11: And where do you think we are in regards to energy price increases? Do you think we're near the top of the cycle or could there be more hikes to come?
Scott Byrom: Well I think we were expecting two increases. We were expecting one at the moment, which we've already seen - EDF the first to move, British Gas to follow - and another one towards the end of the year.
Now, British Gas have come out and confirmed they won't increase their prices again for 2008 -
Clare Francis: But they went up by 35%!
Scott Byrom: - That is the thing, it went up so dramatically! So it's whether we'll see another increase at the end of the year, certainly early 2009 is an indication. There are rumours that energy prices will go up 60% over the next few years, so there are a few more concerns out there that prices could continue to increase.
Clare Francis: So well worth looking at other possibilities -
Scott Byrom: It's imperative that consumers are proactive and make sure they're continuously finding the best possible deal.
Q12: And the other thing to bear in mind is that with most tariffs it's very easy to move around isn't it, because there are no penalties to tie you in?
Scott Byrom: The online ones that we were mentioning earlier, which are currently the cheapest on the market, they don't have cancellation fees or any contract side of it so you can get out of those contracts or deals in 28 days. The fixed tariffs, there are cancellation fees, anywhere up to £100 to leave that contract, and basically what that means is if you leave, if you change tariff before the end of that term - so if its fixed until the 1st of October 2009, if you try and leave before then you'll face a termination fee.
Clare Francis: Thank you very much Scott.
Scott Byrom: Quite alright, thank you.
