British Gas has become the second of the “Big Six” energy firms to raise prices, and the remaining four are likely to follow suit. Why? Because only one in five households switch.
It’s going to be a long, cold winter for many households across the UK as one by one, gas and electricity suppliers announce price rises.
British Gas is the latest to announce price hikes: the cost of gas will increase by 18 per cent and electricity 16 per cent, as of 18 August, adding around £190 to the average duel fuel household bill.
Scottish Power got the ball rolling last month by announced gas price rises of 19 per cent and electricity by 10 per cent as of 1 August.
And industry experts say the other suppliers are likely to follow suit. Why? Because only one on five households – just 20 per cent – bother to switch.
Win-win for energy firmsHow does this keep prices high, you ask. Well, when one supplier raises prices the others follow suit because they know 80 per cent of consumers won’t bother to switch to a cheaper provider supplier – in other words, they know your custom is guaranteed. So why would they lower prices? Answer: they don’t.
It’s a win-win situation for the energy firms. The only loser is the consumer. However, in so many other areas consumers are used to shopping around for the cheapest price.
Supermarkets, for example, are in a constant battle for custom, with their price wars often making headlines.
And when it comes to car insurance, 70 per cent of motorists looked around for a better deal at renewal time, according to retail analysis firm Mintel.
Consumers missing out on savingsSo why is it that when it comes to the cost of heating your home, consumers fall short? Well, energy firms don’t exactly make it easy to shop around.
Energy regulator Ofgem’s review of the energy market, published in March this year, found there were too many tariffs on offer, confusing consumers and putting them off looking for a better deal.
Ofgem’s review also found that energy suppliers were quick to raise prices when the cost of wholesale gas – the amount suppliers pay for their energy – rose, but slow to cut rates when the price of gas fell.
The regulator is consulting with the industry over reforms which, it is hoped, will make it easier to shop around.
Fuel poverty on the riseBut with newly released figures showing that fuel poverty is on the increase, householders will have to act now if they want to save money on their heating in time for winter.
A household is described as being in fuel poverty when it has to spend more than 10 per cent of its income on keeping warm.
According to the Department of Energy and Climate Change (DECC), 5.5 million households were affected by fuel poverty in 2009, up from 4.5 million the year before.
The DECC predicts the numbers for 2010 and 2011 will have increased because of further rises in the price of gas and electricity.
However, consumer watchdog Consumer Focus says the predictions for fuel poverty in 2011 are likely to be an underestimate.
Audrey Gallacher, director of energy at Consumer Focus, said: ‘Worryingly, the predictions for fuel poverty in 2011 are likely to be an underestimate as four of the Big Six have yet to announce their expected price rises.
“If these are in line with the increases announced from British Gas and Scottish Power, around 12 million people, or 6.4 million British households, are likely to be in fuel poverty when the latest price rises hit.”
Switch and fixConsumers who want to avoid price rises can opt for a fixed or capped energy tariff. These deals set the unit price (also known as the kilowatt hour or kWh price) of your gas and electricity for a certain period of time.
However, due to the price guarantee that comes with fixed and capped tariffs it does mean that they cost more per unit than standard tariffs, but they do provide peace of mind to those worried about future price rises.
And with prices almost certainly on the increase, consumers on fixed or capped tariffs are likely to see a benefit.
Lisa Greenfield, energy analyst at Confused.com, said: “We advise consumers to opt for a fixed or capped tariff as they offer price security against from future hikes.
“Paying by direct debit and managing your account online will also be cheaper.
“The best deals are sure to be pulled soon so we urge consumers to act quickly.”
How to switchIf you want to know more about how to switch energy suppliers, read our step-by-step guide to switching. And be bamboozled by energy no more with our round-up of the top ten energy myths.
Best buy dual fuel fixed and capped tariffs as at 20/07/2011SupplierTariffAverage UK billEDF Fixed S@ver V2£1,009npowerPrice Protector£1,054EonFixed Price 5£1,126Scottish and SouthernFixed price 6£1,143Scottish PowerPlatinum Fixed Energy January 2014 Online NSC£1,202British GasPrice Promise March 2013£1,284Topics: Shrink your bills Tags: Gas & electricity, Consumer rights Confused Topics Get motoring Property market Deal with debt Plan for the future Smarter spending Get wealthy Travel & holidays Shrink your bills Your consumer rights Reduce your energy bills 50% of Confused.com customers save at least £210 when they change tariffs Compare the whole UK energy market for the best deals Fill in one short form, and we do all the legwork for you
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Compare Gas & Electricity Naphtalia Loderick
Naphtalia Loderick reports on all things personal finance at Confused.com. She started out on a weekly newspaper, via a national news agency and a stint in the fun but ‘not as glamorous as it appears on screen’ world of TV at the BBC researching consumer films for The One Show. Latest articles from this author 
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