Most of us will be aware that something is going on at the moment with energy prices – the papers have been full of ‘experts’ keen to talk up a full-blown price hike based on an upward trend in online prices. At best the arguments being made are confused, but at worst they are highly misleading. I think it’s time to put the record straight.
We can’t get away from the fact that there is some uncertainty at the moment, but while wholesale prices have gone up it is important to view this in context. Firstly, wholesale prices are still comparatively low compared with 2008 when household energy prices rocketed by 42%. Secondly, we don’t know whether we are looking at a short-term blip or an ongoing trend. The truth is that suppliers would need to see a consistent trend in substantially higher wholesale prices before they could justify a general price hike and we are far from seeing that yet. That’s not to say it won’t happen, and I have no doubt that we will see energy prices on the rise again, but I would be very surprised if it’s this year.
Online plans however are a different ball game. They are far more keenly priced and also far more likely to reflect any volatility in the market. Online prices have been creeping upwards recently as suppliers pull their most competitive deals and replace them with more costly versions. And while this could be blamed entirely on rising wholesale costs, I think anyone doing so is missing another important point. The coalition Government has already indicated that suppliers will need to start displaying their lowest tariffs on bills and Ofgem is currently looking at cost reflectivity. The natural reaction to news like this is for suppliers to start narrowing the gap between the cheapest online prices and the more expensive standard prices and I think that a lot of the recent changes we’ve been seeing can be attributed to this as much as to wholesale prices.
But when it comes to the impact on our energy bills, it doesn’t matter what is causing the change so much as what consumers can do about it. And there is still some really good news here – although prices are creeping up, online plans are still coming in at around £300 a year cheaper than standard plans. The average annual household energy bill for those online is £900 compared to £1,194 for standard plan customers. This is still a significant saving, but one that will gradually be eroded if suppliers continue to chip away at their online prices. So my advice to consumers is very simple. Don’t hang around – sign up to an online plan today before all the competitive deals are pulled. If the deal you take is a fixed price online plan this will guarantee your prices for the length of the ‘fix’ – great if it lasts for over 12 months given that prices could be on the up again next year.
But even if it’s not fixed, you will still benefit from lower prices straight away and will enjoy a certain level of protection. This is because suppliers are closing their existing plans to new business, but leaving existing customers on them while bringing out a higher priced new plan. Customers already on the plan are left paying the lower price, at least for the time being, so there really is everything to gain and very little to lose by snapping up a competitive online deal today…