Bills are set to soar due to price rises and cold weather but an inquiry into high profits could force tariffs down.
A combination of some extra-cold weather and price rises from most of the country’s energy firms mean households are battling huge increases in gas and electricity bills at the moment.
Recent research from Confused.com suggests that the average family could see their heating costs rise by almost £60 for December, January and February due to the weather and higher tariffs.
But there could be some good news in the shape of an investigation by the energy regulator into allegedly excessive power-company profits.
The end of price rises?
Five of the leading six energy companies have now announced price increases this winter. Scottish Power, Scottish & Southern and British Gas all hiked rates before Christmas, while rises from npower and E.ON came affected their customers in January.
Only EDF has yet to impose higher energy costs – the firm pledged in November not to change its tariffs until 1 March 2011 at the earliest.
It is rare – although not unheard of – for firms to make two price increases in quick succession, so now is a good time to think about switching energy supplier.
Half of all those who used Confused.com’s switching service in the first half of last year cut at least £282 off their annual energy bills by changing provider.
A crackdown on profits
There could be good news for energy users on the horizon if an ongoing investigation into profit levels at gas and energy suppliers finds any evidence of foul play.
The energy regulator Ofgem is conducting an inquiry into alleged profiteering: this month its boss Alistair Buchanan told MPs on the Energy Select Committee that suppliers’ profit per customer had risen by almost half since last September.
The profit on an average family’s annual energy bill of £1,200 has increased from £65 to £97 in the past four months.
The outcome of Ofgem’s inquiry is expected in March. It has the power to refer the industry to the Competition Commission, which can regulate prices – but any price cuts, if they are deemed necessary, are likely to be some way off.
Changes to average bills
There are also changes afoot to the way Ofgem calculates “average” bills: this won’t affect the cost of your energy, but it is relevant when you come to assessing your own usage, or working out whether you’d be better off switching.
Ofgem uses an average bill when it shows how much money the typical family can save by switching to a certain tariff – these figures are also used by the media, as well as price comparison services.
Research has shown that households are using less gas due to better energy efficiency, such as insulation or more economical heating systems. Electricity use has stayed the same: our appliances and light bulbs may be more efficient, but these savings are offset by the fact we are using more gadgets.
So a “medium user” family now consumes 16,500 kWh of gas a year, compared with 20,500 kWh previously; electricity remains at 3,300 kWh a year. The typical annual bill has, therefore, fallen to £1,032 from £1,153.
Ofgem says that, rather than using typical figures for energy bills to see how much you can save by changing supplier, you should have to hand your home’s actual annual gas and electricity use when comparing energy suppliers.
That way, you’ll get a much more accurate picture of how much you stand to save.
