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August 17, 2012 6:39 pm

Are you overpaying for home energy?

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Fresh questions have been raised this week over whether UK consumers are benefiting from lower wholesale prices for gas and electricity, after energy giant Eon revealed its first-half earnings had soared by 55 per cent.

The news follows mounting pressure on British Gas to drop its prices after it also revealed a surge in profits for the first half of this year, up 23 per cent.

energy table

energy table

“Such a big increase, hard on the heels of British Gas profit rises, will leave customers questioning whether the price they are paying is fair,” said Richard Hall, head of energy regulation at Consumer Focus.

“Wholesale prices are now a long way from their peak and Eon has reported greater margins based on changes in their costs. This will reopen questions on whether falls in wholesale pricing are fed through fairly and fully.”

The news also comes amid reports that hundreds of thousands of consumers on cheap energy tariffs are coming to the end of those deals and could struggle on variable rate bills.

EDF Energy customers on the Fixed Saver 2 product have enjoyed a price freeze since signing up to the deal in April 2011. These customers have been sheltered from the latest round of price hikes, and will have saved 18 per cent on their bills compared with those households on the average variable plan.

USwitch.com, the price comparison website, said these consumers could be £120 a year worse off if they revert to EDF’s standard prices once the deal expires on September 30.

“Those who have enjoyed protection from price rises may be in for a bill shock when the plan comes to an end in six weeks,” said Tom Lyon, energy expert at uSwitch.com.

After a mild winter, wholesale prices are now increasing again, and experts predict that household energy prices will rise further this year as a result. This follows a rise in utility bills of about 20 per cent last year, taking the average household bill to £1,258 a year.

Experts say the threat of rising prices suggests now could be a good time to switch to a better home energy deal or to lock in a fixed-rate tariff.

The UK market is dominated by the “big six” energy suppliers; British Gas, EDF Energy, Eon, SSE, Npower and ScottishPower and only a fraction of consumers ever switch supplier. Those who do, complain about the overly complicated process, as there are about 400 different tariffs to choose from.

 
FT Money Show podcast

Listen to Lucy Warwick-Ching talking about rising energy bills on the FT Money Show podcast

Scott Byrom of MoneySupermarket, a price comparison website, said: “There are competitively priced fixed tariffs available on the market at the moment and in some cases these deals are cheaper than the online products offered by the energy companies.

“Not only are these deals good value but they also offer the peace of mind that you wouldn’t be affected by price increases should they occur.”

Those consumers who are prepared to switch provider and want to fix a price will find the best deal at independent energy supplier First Utility, which offers iSave Fixed Price v2, a dual-fuel tariff priced at £1,047 a year.

The best fixed rate from a larger provider is ScottishPower’s Online Energy plan, which is held at £1,050 until November 2013.

These prices are based on an “average” household which uses 3,300 kWh of electricity and 16,500 kWh of gas each year. Larger households will pay more and prices will also fluctuate depending on the location of a property.

Byrom likes the Blue + Price Promise from EDF Energy. The deal is fixed until April 2014, but there are no termination fees should customers switch earlier. “It has no exit fees, enabling customers to move away from the deal before the term ends to take a lower priced product if one becomes available,” he noted. “This tariff has average annual bills of £1,058.”

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