Rising Energy Costs: Tips to Reduce Your Bill

As storms Bert and Conall caused disruption across the UK last week, many households have increased their heating usage.

Data from the comparison platform Uswitch indicates that the average gas consumption for a household increases from 1,840 kilowatt-hours (kWh) in November to 1,940 kWh in December, peaking at 2,339 kWh in January.

The regulator Ofgem sets a price cap every three months that limits the cost per unit of gas and electricity that providers can charge on their standard variable tariffs. Starting January 1, the price cap will rise to an annual cost of £1,738 for the average dual fuel household paying by direct debit. This marks an increase of £21 from the current cap of £1,717 and is £170 higher than the £1,568 set in July.

Here’s what you should know to manage your energy expenses effectively.

Future Trends in Energy Pricing

Analysts have differing views on the trajectory of energy prices. Cornwall Insight predicts a slight decrease in the price cap to £1,713 by April, while BFY forecasts a rise to £1,740, followed by minor reductions to £1,710 in July and £1,700 from October. Keep in mind that actual bills will vary based on your specific usage and these figures are averages.

Even potential price dips are unlikely to bring us close to the pre-crisis cap of £1,277 set in October 2021. A global gas supply crisis, worsened by the geopolitical tensions following Russia’s invasion of Ukraine in 2022, caused prices to surge. This situation led to nearly 28 suppliers collapsing and Ofgem’s cap exceeding £3,500 before the government intervened to stabilize bills to an average of £2,500.

Is It Time to Consider a Fixed Tariff?

While the price cap restricts costs on standard variable tariffs, Uswitch notes that suppliers are currently offering 23 fixed-rate options below the cap.

This trend has led to increased switching among consumers. Approximately 290,400 customers changed their suppliers in September and 274,906 in October, representing the highest levels of switching since October 2021, when 363,293 people switched to avoid rising costs, according to Energy UK.

The most affordable deal available is from Eon, priced at £1,597 per year for the average household, which is £141 less than the upcoming January cap. This option is an 18-month fixed contract with a £50 exit fee per fuel. The best one-year deal comes from Outfox the Market at £1,606 annually, with a £25 exit fee.

Determining whether a fixed tariff will be less expensive than the price cap over the next year can be complex. Based on BFY’s projections, a fixed rate of £1,723 could lead to savings for the typical household.

Opting for a deal without exit fees can offer more flexibility. Octopus Energy provides a 12-month fixed tariff at £1,609 with no exit penalties.

Assistance for Energy Bills

Nearly 9.9 million pensioners may miss out on winter fuel payments of up to £300 this year due to government restrictions limiting eligibility to those receiving pension credit or universal credit.

Approximately 880,000 pensioners are estimated to be eligible for pension credit but have not applied. Those living alone with a weekly income below £218.15 (£332.95 if living with a partner) may qualify.

Applying for pension credit might also entitle you to the warm home discount, which provides £150 off your electricity bill in England or Wales and automatic cold weather payments of £25 if temperatures drop below freezing for seven consecutive days. In Scotland, pension or universal credit recipients may be eligible for a winter heating payment of £58.75 annually. There is no similar program in Northern Ireland.

If you’re facing difficulty with your bills, contact your energy supplier for assistance. Energy UK has committed to providing customers with £500 million in support, potentially in the form of account credits or aid in addressing energy debt.

Improving your home’s energy efficiency can also help reduce costs. Households with an Energy Performance Certificate rating of D or lower, within certain council tax bands, may apply for free insulation through the government’s Great British Insulation Scheme. In Northern Ireland, the Affordable Warmth Scheme offers grants up to £10,000 for low-income households for needed insulation measures. These initiatives are available to renters as well.

About Smart Meters

The government aims for 74.5% of homes to have smart meters by the end of next year, claiming that these devices facilitate better usage tracking and accurate billing.

However, about 10% of smart meters (approximately 3.5 million) are currently in “dumb” mode and may not function correctly. This often affects older Smets1 meters when a customer transitions to a new supplier. Such meters typically rely on older mobile networks, which can be phased out, resulting in issues for customers in areas with weak signals.

Suppliers are responsible for upgrading obsolete Smets1 meters or replacing them with Smets2 meters, which have been in circulation since 2018 and remain functional during supplier changes. They are also obliged to resolve any other meter-related problems. Should an issue remain unresolved after eight weeks, a complaint can be filed with the Energy Ombudsman.

Visit the Citizens Advice website to check the functionality of your smart meter, which requires the meter’s administration number (MPAN) found on your energy bills.

It’s worth noting that you are not obligated to have a smart meter, and only one among the ten cheapest fixed energy deals (from Eon) requires the installation of one. Additionally, around 900,000 older meters operate on the Radio Teleswitch Service, relying on radio signals to manage switching between peak and off-peak rates. These signals will be deactivated on June 30 next year, necessitating smart meter installations as replacements.