Comparing prices can be confusing
Nov 27 2010 Huddersfield Daily Examiner
Energy prices are soaring. So how do you find out what’s the best deal for you? ANDREW HIRST looks into the whole energy issue.
THE accounts of UK energy suppliers are to be investigated after the industry watchdog discovered profit margins soared 38% in the wake of consumer price hikes.
Ofgem has revealed that the average margin on a standard dual-fuel tariff has risen from £65 to £90 since September and it wants to ensure providers are not boosting profits at the expense of the consumer.
The move comes shortly after major companies including British Gas, Scottish & Southern and Scottish Power hit households with price hikes.
Ofgem said it would look at the “facts behind the numbers’’ as companies claimed rising prices in the wholesale market – where suppliers buy their energy – left them with no choice but to lift bills.
Energy firms have claimed wholesale gas prices have risen more than 25% since the spring.
Alistair Buchanan, Ofgem’s chief executive, said he wanted to make sure firms were “playing it straight” with customers.
He said: “We will go beyond our usual quarterly reports on prices and do a comprehensive review of the retail market and our recent reforms from the consumers’ perspective.
“We will also carry out a detailed investigation of the newly available retail accounts and the facts behind these numbers.
“Greater transparency in the market is good for consumers, investors and for the energy industry as a whole.”
But how easy is it to compare prices as the six major companies have different pricing packages.
One way is to use the comparison website uSwitch.
A spokeswoman said: “Comparing prices can be very complicated and confusing. We now have an online mechanism which cuts through this.’’
For it to work people need to know their gas and electricity consumption for the year by adding up their bills.
They will also need to put in their address as there are also regional fluctuations.
The uSwitch spokeswoman added: “We need this to work out the best deals but it does end up comparing like to like.’’
She said that generally speaking to get the best deals people need to get their gas and electricity from one supplier, pay by direct debit and sign up for an online energy plan.
Ofgem warned in a recent report that rising wholesale prices, boosted by increased demand and the impact of soaring crude oil costs, could be passed on to the consumer.
British Gas managing director Phil Bentley said earlier this month that his company had been selling gas at a loss, which was not sustainable.
But consumer groups have questioned energy suppliers’ figures, claiming wholesale prices are still around half their peak in 2008, while in the same period customers’ prices have fallen by less than 10%.
British Gas, owned by Centrica, saw profits nearly double in the first six months of 2010 to £585m – after the coldest winter for 30 years saw customers turn up the thermostat.
But Scottish & Southern Energy (SSE) announced a 6% fall in half-year profits earlier this month after selling gas at a loss.
In its latest market report, Ofgem has taken into account the higher prices announced so far by three of the “big six” energy suppliers.
Ofgem said it aims to finish its investigation by March next year.
Since the end of October British Gas, Scottish & Southern Energy (SSE) and Scottish Power have said they will hit customers with average rises of up to 9.4%.
EDF Energy is the only “big six” supplier to have guaranteed to freeze standard gas and electricity prices for residential customers at current levels until at least March 2011.
E.ON and npower have not yet made their pricing positions known.
Consumer Focus said that after the recent increases take effect, Scottish Power will be the most expensive of the major providers for dual fuel customers who pay on receipt of their bill.
According to the watchdog, SSE will be the dearest for monthly direct debit dual fuel customers, followed by British Gas and Scottish Power, according to the watchdog.
Here is a breakdown of the planned increases by company:
Scottish & Southern Energy – average gas bill will increase by 9.4% and the price increases come into effect on December 1. A dual fuel customer’s annual bill, paid upon receipt of bill, will rise to £1,226 from £1,159, according to Consumer Focus.
British Gas – household bills for gas and electricity will increase by an average of 7% and price increases come into affect on December 10. These will apply to around eight million customers. A dual-fuel customer’s annual bill, paid upon receipt of bill, will rise to £1,239 from £1,157, according to Consumer focus.
Scottish Power – average gas bill increased by 2% and the average electricity bill increased by 8.9%. These price increases came into effect on November 25 and apply to around 2.5 million households. A dual-fuel customer’s annual bill, paid upon receipt of bill, will rise to £1,357 from £1,304 a year ago, according to Consumer Focus.