Did you know that energy tariffs are changing?

By this summer there will be just four tariffs to choose from – instead of the hundreds on offer previously – and your energy company will automatically choose one for you if you don’t get in touch with them.

With millions of households struggling to keep up with relentless energy bill hikes and the government struggling to develop a new strategy to tackle fuel poverty, now is the time to take action and switch to a better deal. Despite the potential savings of changing tariffs, only half of us have switched in the past. In fact it is estimated that 75% of us are paying more than we should be – hardly surprising when the marketplace has been such a minefield of complexity.

But the good news is it’s getting simpler to switch – and the prize for a first-time switcher could be a saving on their annual energy bill of anywhere between £150-£250.

Ofgem, the gas and electricity regulator, backed by the Government, is now driving forward a simplification process which customers are beginning to notice as energy suppliers implement the changes. Tariffs, the style and information on bills and companies’ letters to customers are all changing. But customers need to be vigilant in case they inadvertently end up on an unsuitable or even more expensive tariff. So it’s more important than ever to pay attention to communications from your energy supplier and to give them a call if you think you’ve got a bad deal.

Dramatic reduction

By 30 June when the simplification process ends there will have been a dramatic reduction in the number of tariffs offered. Since 1 January, once you have chosen how you want to pay (by pre-payment meter, standard credit, direct debit or online), your energy supplier can quote you a choice of four tariffs for gas and four for electricity. The only discounts permitted will be for dual fuel deals, or for managing your account on line. The same applies to all suppliers, so you can compare their offers much more easily.

Warning

But here is the warning: if you are currently on a tariff which is not one of the ‘core’ four, your supplier will automatically switch you onto one.

They will write to you beforehand, and they are duty-bound to propose the best deal for you, but it would be prudent to review that selection – you may want to change your payment method or opt for a fixed term tariff perhaps, whatever works best for you.

Companies will also have to tell you regularly about their cheapest tariff – on your bills, and in other communications such as your annual statement. That annual statement will also give you a personal projection of your costs for the next twelve months (based on your past energy use). And by 31 March they will be obliged to send you a Tariff Comparison Rate which is designed to help you work out your own likely costs if you choose to switch to a different tariff.

Another change is that the four ‘core’ tariffs will be shown priced with a standing charge element and a consumption charge. A high standing charge will probably be associated with a low consumption charge and vice versa. So in choosing a new tariff, householders may need to consider whether they are low volume users of energy, which might prompt them to choose a tariff with a low (or zero) standing charge. This is where the Tariff Comparison Rate table and your annual energy statement can help.

New standards

Since last autumn there are new Standards of Conduct for suppliers and Ofgem have the powers to fine companies which breach them. For instance, if you are currently on a fixed-term tariff which is coming to an end, the company cannot automatically switch you to a new fixed-term contract. It can offer you a new fixed-term contract, but you have to make a positive choice – if you do not contact your supplier, by default you might be put onto a standard variable rate tariff. So in this new, simpler environment, it is important to be mindful of the letters and communications from your supplier and to respond to them if you feel that they are treating you unfairly.

The avowed aim of all this activity is to make it easier for us to be active and informed consumers, able to make intelligent decisions about how we buy our gas and electricity and hopefully save a bit of money too. But the downside is that we do need to be attentive to tariff and price information which comes from our supplier.

In particular, in the second quarter of this year, there will be a lot of information from suppliers and at the end of June a number of ‘dead’ or ‘non-core’ tariffs will close: householders who have not made a positive choice will end up on the cheapest tariff as perceived by their energy company. But remember, your company only knows how you pay and how much energy you use. You may want to change your payment method, or opt for a fixed term deal – in which case, you need to tell them.

So the upshot is – check EVERYTHING that your energy supplier sends to you over the coming months or you could pay over the odds on a tariff that doesn’t work for you.