The average household already spends more than £1,000 a year on heating and lighting their homes and the typical outlay will have jumped to £1,200 by the summer.
You can, however, save more than £200 a year by switching to a cheaper energy supplier. And families can make even bigger savings — up to £500 a year — if they make their homes more energy-efficient, and take advantage of government grants to help with the initial costs.
You could even follow Conservative party leader David Cameron’s lead and take steps to install solar heating or wind turbines in your home. Grants of up to £5,000 are available to help with installation costs, and you could recoup the rest of the outlay in a few years because the bill from your traditional supplier will go down (see below).
Energy suppliers argue that household bills are rising because they are having to pass on record wholesale gas prices.
Higher wholesale gas prices push up electricity as well as gas bills because gas-fired power stations generate 40% of the electricity we use.
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And they have more than tripled since January 2004 as Britain’s North Sea gas fields have dwindled and the cost of supplies from elsewhere in the world has soared along with the oil price.
Energy companies are still netting record profits despite higher costs. Scottish Power announced last week that profits jumped more than 40% to £470m in the nine months to December, but it will still raise customers’ gas and electricity bills by 15% and 8% respectively from March 1.
This will be the second round of price hikes in just four months, and will mean Scottish Power has the highest gas prices in Britain.
British Gas is also reportedly planning to raise its gas prices by 25% in the coming weeks, although the company claims it has yet to decide when it will increase bills and by how much.
And all the main players have hiked prices at least once in the last couple of months.
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Allan Asher, chief executive of Energywatch, an energy watchdog, said: “We are very annoyed that suppliers feel they can impose double-digit price hikes without consequence.”
The government is urging consumers to make the most of increased competition in the sector and switch to a cheaper energy provider.
Switching used to be a time- consuming and often frustrating process, with one in three transfers running into serious problems, according to Energywatch figures.
However, the number of complaints that it receives about switching has plummeted since energy suppliers pledged to improve their services last year.
Asher said: “The majority of transfers are now painless. As part of last year’s agreement, companies have promised that a switch will take no longer than 28 days.”
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There are still potential pitfalls, though. The recent collapse of small energy providers Zest4, Utilita and Basic Power illustrates the dangers of moving to a less well-established supplier.
Their customers are being automatically switched to another provider chosen by Ofgem. In Zest4’s case this is British Gas, while the replacement supplier for Utilita customers will be EDF Energy.
In most cases their bills are set to shoot up as a result — and some people have also lost out in other ways.
Utilita customer Joanna Macmanus’s account was £293.36 in credit when the company went under and her attempts to claim a refund have so far ended in disappointment.
Macmanus, a 42-year-old optometrist who lives in Ower, Hampshire, said: “I am beginning to doubt we will get our money back and would warn other people planning to switch to be very careful about the supplier they choose. These smaller companies just don’t seem able to deal with the escalating wholesale gas charges.”
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There is also no guarantee the company you switch to will not announce price increases soon afterwards. In fact, with wholesale gas prices forecast to go even higher, it probably will.
One way to avoid further price hikes is to opt for a fixed or capped-rate tariff. But these plans typically charge a 15% to 20% premium compared with the cheapest energy deals on the market in return for protecting you from rising costs.
Some, such as those from British Gas and Southern Electric, also impose exit penalties.
A spokeswoman for Uswitch, another comparison website, said: “Capped and fixed products offer a reassurance that the price consumers pay for their energy will not go up. With a fixed rate, your bills will not go down either. People who want the maximum savings will be better off with a cheaper, online tariff. However, a capped plan may be attractive if you want security, and may still offer big savings if you are switching for the first time.”
The heats on British Gas
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