18 September 2013

Energy Market Update – September 2013

We look at current trends in the domestic energy market. Prices creep upwards and though long fixes are available, is the security worth the extra cost?

There is no doubt that the trend towards higher utility prices is continuing – our table below clearly illustrated this, and with a raft of additional costs the energy firms are having to take on board, from the greener energy bills to home insulation subsidies there is likely to be no respite long term. Indeed industry experts tend to suggest that by 2020 prices will be up by around 40%.

Energy companies are responding to customer concerns over this with longer ‘fixed tariffs' although these can have a significant cost penalty. The current longest fix is from npower – which allows you to fix until the end of March 2017. There is a price to pay for this guarantee – it's currently around 17.5% more expensive than the current cheapest fix meaning the best deal prices would have to increase by around 12.5% per year before you would save money on that tariff. This tariff still has it's place, especially for those who perhaps don't switch as soon as their last deal is over?

That current cheapest fix for many is from M&S Energy – presumably trying to win back market share after the mis-selling row targeting Gladys. Sadly, we can't switch you to M&S Energy, but if you select "No” when asked "Show only tariffs that we can switch you today?” their prices will come up and if their tariff works out best for you – just go for it.

A couple of months ago, the difference between the cheapest and most expensive tariffs ("standard” usage both paid by monthly direct debit, Southern area) was just under £400 per year (or about 35% of the bill). That gap has shrunk to approximately £250 now as we have lost some of the most and least competitive tariffs.

Spark Energy withdrew their Spark Advance tariff from the market on the 24th May and on June 28th, Ofgem launched an investigation into Spark Energy's complaints handling procedures, billing practices and customer switching processes. Our experience has reflected that Spark's customer communications and service has been problematic. However, those whose transfers have been without issue have been rewarded with some of the cheapest energy around. We hope to see Spark back offering Spark Advance 2 soon, once they've resolved any backlog of customer service issues.

Another small supplier, Flow Energy has also withdrawn from the market, though for the better reason that they have met their targeted number of customers. Flow aim to get back on the market in April 2014 with the launch of an interesting microCHP (combined heat and power) boiler which generates electricity as a by-product of producing heat.

You would expect to get the best prices by going for a dual fuel deal, but it's not necessarily the case. As suppliers try different approaches with standing charges and unit rates and some of the new energy companies only offer one or the other, you can actually find it's cheaper to get your Electricity from one supplier and Gas from another. We found a 4% saving* by doing so – just look at the Gas Only Price and Electricity Only Prices on the results table when running a comparison. One warning with this approach is to check what will happen at the end of any fixed terms on each separate contract. You don't want to be forced into only looking for a single fuel or paying termination fees when a fixed term on one fuel ends but hasn't on the other!

*Savings based on "standard” usage figures of 3,300kWh electricity and 16,500kWh gas for an RG41 postcode paying by direct debit. Best dual fuel price was £1149.69 from First:Utility iSave v16. Best Gas Only price was £637.87 from Better Energy's Online Saver 1 and best Electricity only price was £466.47 from isupplyenergy's iFix 201310. Total price for separate suppliers: £1104.34, saving £45.35 or approx 4% compared to the best dual fuel rate.