To believe all the hype you would think every UK energy consumer could save tons of money by switching energy suppliers. And while it is true some can, others cannot. Getting the best deal on energy is more than simply switching suppliers on a regular basis. It's also about knowing what goes into how much you pay.
There are many different factors used to calculate the total price you pay for your gas and electric. These are factors like the type of meter you use, how much energy you consume, the tariff you are currently on, how you pay for your energy usage, and so on. Before you switch energy suppliers, take the time to read this important guide.
The place to start is with the idea of energy tariffs. Do not be confused over the term "tariff;” it is simply the term we use to describe the going rate you pay for your energy consumption. It has nothing to do with the taxes placed on imported and exported goods.
That said, there are a variety of tariffs available to energy consumers based on lots of different conditions. The Which? website does an excellent job explaining all of them clearly. We will highlight the most important ones here:
- Fixed Price - A fixed energy tariff guarantees a set price for a specific amount of time. Your price does not go up or down during the term regardless of market conditions. If you prefer stability in utility bills this is a good option.
- Variable Price - This tariff is exactly the opposite. It will go up and down throughout the year based on supply, weather, and current market volatility. You may get a cheaper overall price this way but you are still subject to price increases at the same time.
- Dual Fuel - The dual fuel tariff is designed to give customers the opportunity to pay lower prices in exchange for combining both services with the same supplier. The suppliers benefit inasmuch as it is easier for them from the billing and customer service standpoint.
- Economy 7 - Households that use the majority of their electricity at night or that utilise a night storage system can get a cheaper rate using the Economy 7 tariff. This type of service involves using a meter that measures electrical consumption separately during the day and the night. Different rates apply to both types of usage.
- Economy 10 - This tariff is similar to Economy 7 in that it provides discounted rates for energy consumption at specific times during the day. However, unlike Economy 7, this tariff applies to 10 specific hours, three of them being during the daytime.
- Feed-In Tariff - The feed-in tariff rewards customers who generate their own supplemental electricity with reduced rates and the opportunity to sell any excess back to the power company. Although it requires an investment in power generating equipment, this type of service can be financially beneficial.
- Prepayment Tariff - Customers using a prepayment meter are only eligible for this option. Unfortunately, the prepayment tariff is usually among the highest priced a given company offers.
Before you switch energy suppliers, it is important to know what tariff you are on and what you might be eligible for. It may be that your best option is to simply switch to a new tariff with your current provider rather than switching. If you do not know what tariffs you qualify for, switching to a new provider may not solve anything.
The next thing you need to know before switching is that there are different types of meters involved. You are probably aware that there are separate meters for both gas and electrical service, but here are also different types of meters for each category.
For example, you might use a smart meter for your electrical service and a standard meter for your gas. The smart meter works wirelessly to measure the amount of electricity you use and display it according to whatever means the power company set up. It all works automatically and communicates directly with the power company.
The standard meter will show either dials or a digital display which the customer reads on a regular basis. Those readings are sent to the energy supplier for billing purposes. In months when those readings are not supplied, the power company will use an estimated reading based on historical usage data.
It is important to consider meter types because they directly affect the rate you pay in some cases. For instance, in the previous section we briefly mentioned the prepayment tariff. If you are using a prepayment meter, this is the only tariff option you have. You cannot switch to a less expensive tariff without first changing the meter.
When you switch utility providers they may, or may not, support the type of meter currently installed on the premises. If they don't, a new meter will have to be installed. Usually this is done at the customer's expense. Consumers who want to get a prepayment meter replaced with a contract meter will also have to meet certain requirements in order to get that done.
When you search for better utility prices, you will probably be asked for your payment method. This may affect the price you pay inasmuch as some power companies offer discounts for certain types of payment methods. The main methods for paying for energy in the UK are:
- Direct Debit - The direct debit method involves your utility supplier debiting your bank account either on a monthly or quarterly basis. The power company determines the amount you pay. They start with an estimation of what you are likely to use in a year and then divide that number by the number of payments you will be making throughout the year.
- Variable-Rate Direct Debit - This method is similar to the previous one except for one major difference: the amount you pay at any given time is subject to change. Rather than a fixed amount based on 12 months of estimated usage the variable amount is directly tied to how much energy you consumed during the previous month or quarter.
- Standing Order - The standing order method is also similar to direct debit except for the fact that the transaction occurs in the opposite direction. Rather than the utility supplier debiting your account, your bank is instructed to send the supplier a set amount every month. When you choose a standing order, you have control over how much to pay month-to-month. At the end of the term, you will have to make up any deficiencies.
- Payment Cards - With this payment method, the power company issues you a card enabling you to pay utility bills through a third-party outlet like PayPoint or the Post Office.
- Credit and Debit Cards - When you use this method, you receive a monthly bill which is payable on receipt. You use your credit or debit card and then deal with your bank accordingly.
- Cash or Cheque - The old standby in the absence of other forms of payment is cash or cheque. In order to discourage this type of payment, most utility providers will not offer any discounts here. Paying with this method is one way to make sure you do not go into debt with the utility company but is more expensive.
As previously stated, your payment method is important because energy suppliers may offer certain discounts for some types of payments. They do so in order to encourage efficiency and reliability. If you can utilise the payment method a given company prefers, you can get a better overall price through discounts.
How to Make the Switch
Once you have determined the best tariff and payment method then you may decide that it's time to switch to a new supplier. So how do you do that? The Telegraph offers a fairly comprehensive guide that is easy to follow. We will outline the process here for your convenience.
It begins by contacting both your current energy supplier and the new one you plan switching to. With the old provider, you will have to work out a date for your final meter read, whether or not there are any cancellation fees, and how any outstanding balance will be paid. If you are currently in arrears on your account, you may not be able to switch until it is completely paid off.
With your new supplier, you will have to set up a switch date, a payment method, the appropriate tariff, and any details regarding your meter. When both suppliers are on the same page, you simply wait for the chosen date for the switch over.
On that date, it is best to contact both suppliers to make sure the switch has been completed. Your new supplier should send you a copy of the energy supply contract as well as any other pertinent information. You should take a final meter read on your own in order to compare that against what your old provider may bill you for.
It is important to note that if you had a direct debit or standing order in place with your old supplier, it should remain in place until you are positive your account is clear. Otherwise, you could end up in a situation of trying to sort out past balances with your old energy supplier.
As long as paperwork is in order and accounts are cleared, switching to a new energy supplier is relatively painless. The one exception is the prepayment tariff and meter. Often times those on this scheme have a bit more difficulty making the switch. It is still possible however, so do not give up and assume it cannot be done.
Switching energy suppliers benefits quite a few Brits by offering them the chance to find better pricing. However, before you switch make sure you understand what is involved and what is required to find a better price. That way there will be no surprises when the time comes.
Given the fact that tariffs are often confusing, we have provided links to three websites that will offer you some clarity. It is important to understand tariffs when you are searching for better energy prices. If you need further information, there are plenty of helpful websites you can look into.
Consumer Focus - As a consumer advocacy organisation Consumer Focus seeks to educate and inform. This page provides detailed information about most of the energy tariffs currently available in the UK.
This is Staffordshire - A community news website focused on the Staffordshire area. They offer a general overview and explanation of various types of energy tariffs.
BBC News - This November 2012 report highlights proposed changes for energy tariffs that should be in place by 2014. If all goes as planned, many UK consumers could see lower energy bills.
Comparison websites offer a great way to search for energy prices quickly and easily. They typically ask for a limited amount of information that they are then able to use to scour prices from across the industry. Here are links to some reputable comparison websites to get you started in your search:
Go Compare - This site partners with Energylinks to help you find the best price and provide an easy means of switching. They claim you could save more than £360 per year on your utility bills through them.
Money Supermarket - When you quote and switch here, you could save up to £200. This site offers helpful information through FAQs and targeted articles.
Confused.com - Save £320 or more when you stop and switch with this site. Confused.com compares prices among all of the well-known providers like EDF and First Utility.
Compare the Market - You can compare energy prices here quickly and easily by submitting a limited amount of information. If you have a current bill, you can glean from the process is much simpler.
Tesco Compare - On this site you enter your information and let them search for the best deal. They claim results are ready for you in 60 seconds or less. If you find a deal you like you can make the switch online.
uSwitch.com - Read the guides to energy switching on this site before making your decision. When you are ready, you can compare prices and make the switch very easily.
Money.co.uk - Dozens of energy supply options are available here. You can search for comparisons based on gas only, electricity only, dual fuel, and more. All the information is set up in an easy-to-read grid.
Totally Money - TotallyMoney guarantees you will get the best price on utilities when you compare through their website. In addition, you can avail yourself of their free information including their 10 tips for saving by switching providers.
Money Saving Expert - A site offering dozens of free guides relating to energy supply. If you are looking for the cheapest gas and electricity possible, there is a comprehensive guide explaining how to find it. There is also a list of current deals being offered by some of the country's energy providers.