21 May 2014

Energy Market Update May 2014

Want to reduce your contribution to badly behaved energy company profits? If you ignore standard tariff prices from the big six, prices are actually coming down

Energy companies are back on the naughty step again with E.On having to pay out a staggering £12 million in compensation for mis-selling, nPower fined £125,000 for errors in its green energy reporting, Scottish Power fined £750,000 for having an unjustifiably large difference in pricing between different payment methods and SSE are now facing calls to reduce prices after announcing group profit up by nearly 10% – though it should be noted that profits from their energy supply division recorded a drop of nearly a third.

What on earth is a TCF?

Avid readers of their energy bills (ok, not many of us then) may notice new figures creeping in under the acronym of TCF or Tariff Comparison Rate. This is an attempt by Ofgem to ‘simplify the comparison process' by summarising all the costs (standing charges and unit costs) and any discounts into a single figure, well actually two figures, one per fuel. Fine in theory but since part of the costs were fixed and some depended on how much energy you use, they had to set fixed consumption levels (3,200 kWh electricity and 16,500 kWh of gas) to calculate the figures. As such, they're only accurate if your usage precisely matches their figures. If you're a heavy gas user a tariff with a high standing charge but low unit price may work out better than a tariff that's achieved a lower TCF with low standing charges but higher unit costs.

Ofgem did consider Personal TCF's but market research highlighted that customers found these more confusing than helpful. And of course, without giving your personal usage figures to each energy supplier, they would be unable to quote a PTCF…

Our problem with the TCF is that it doesn't really help much and adds more figures and complexity to the bills. Who wants to trawl around noting down each TCF for each fuel and each tariff and each supplier in order to calculate which deals might be cheapest for you? It is far quicker, easier and more accurate to use the MoneyMaxim energy comparison service to see which out of ALL the tariffs available will work best for you.

Energy Market Changes

Though there have been no radical price changes for standard tariffs, there are still plenty of smaller adjustments going on in the marketplace with no fewer than 40 tariffs being launched or revised and 23 removed since the start of April and that excludes the changes nPower made to their tariffs to incorporate discounts into standing charges.

Overall, we're happy to report that energy prices are falling – so long as you pick the right tariff. In mid February the cheapest dual fuel tariff in our area was from OVO which, using the dreaded "standard usage” figures worked out at £1,019.21 for the year. Now, First:Utility's iSave Fixed July 2015 tariff costs £994.44 which represents about a 2.5% reduction. Of course, with standard tariff prices remaining mostly unchanged, this means a widening gap between the "default” tariff and the best on the market. So if you haven't compared energy prices for a while or your current deal has ended, now might be a good time to take a look.

Separate Suppliers, Separate Suppliers!

We have been banging on about this for a while now, but the cheapest way of buying your energy is to use separate suppliers for your gas and electricity. Our quotes showed savings of over 20% are achievable compared to the average of the big six standard tariffs*. Simply run a comparison for dual fuel as normal but then look at the electricity only and gas only tabs. We can't tell if this will be the case in a years time so to keep you options open you may wish to sacrifice the absolute cheapest deal in order to have the contracts ending at the same time.

• Average dual fuel standard tariff for standard consumption in the RG40 area is currently £1,192.29. Cheapest gas only deal was from Daligas for a 1 year fix at £516.51. Cheapest electricity only on a 1 year fix was from OVO's Cheaper Energy Fixed at £436.21 giving a combined total of £952.72 representing a saving of £239.57 or 20.1% against the average big six dual fuel deal and £41.72 or 4.2% against the cheapest dual fuel fix – First:Utility's iSave Fixed July 2015 at £994.44. A further saving of £14.09 (1.4%) would be available if you weren't concerned about synchronising contract termination dates by using Extraenergy's Fixed Price September 2014 v4 tariff.