£1.5 billion added to household energy bills

Consumers are being warned to expect more price rise misery, as energy companies may be forced to make a second round of price rises. The predicted rise – of up to 10% or £105 by the end of the year, comes as a result of the rising cost of gas on the forward market and will pile yet more pressure onto households, says uSwitch.com, the independent price comparison and switching service. It will force household bills up from an average of £1,048, following Scottish and Southern Energy’s announcement yesterday, to £1,153 - £241 more than the average of £912 at the beginning of 2008.

The prospect of higher prices will rankle with customers. Straight after having increased energy bills by an estimated £1.5 billion for UK households, consumers saw a steady procession of big profit announcements from the energy companies. British Gas alone made £571m in profits – a six fold increase on the previous year.

Scottish and Southern Energy is the last of the big six suppliers to put prices up - completing a first round of price increases that npower kicked off on 5th January. While other suppliers followed in quick succession, Scottish and Southern Energy made a pledge to its customers that it would not implement any price rises until at least the end of March. This guarantee allowed its customers to continue to enjoy lower prices for three months.

However, the first round of price hikes may not have been enough. The price of gas on the forward market for next winter is 22% higher than it is at present, making the cost of procuring energy more expensive for suppliers. As seen earlier this year, this rise in costs is unlikely to be absorbed by the energy companies alone. Consumers can expect to bear some of the costs through increased household bills.

With all six major providers having announced price increases this year and more hikes predicted to be on the way, consumers will be looking to shield their household budget from any further blows. The good news is that energy suppliers are still offering their most competitive deals online. Consumers could still save £187 on average by switching from a standard energy plan to an online alternative.

Currently, fewer than 1 in 5 energy customers (19%) are on an online tariff, despite the obvious cost benefit. Sceptics would argue that it is in the energy companies’ best interest for these numbers not to increase as it enables suppliers to appear competitive at little cost - offering cheaper prices on the tariffs with the lowest take-up while keeping the majority of customers paying over the odds. Whatever the case, suppliers want to attract new customers – so it’s up to consumers to make sure that they use the market to their advantage to fully benefit from the lowest available prices.

Some 68% of UK dual fuel households would be happy to manage their energy bills online. However, for 45% the idea of no longer getting a paper bill would be their main reason for not moving to an online tariff. In reality though, each supplier has a different definition of an online tariff. Some simply expect customers to register online, but to manage their account in the same way as before, while others expect the account to be managed online too. Given the difference in how each supplier defines an online tariff, most consumers should be able to find an online energy plan to suit them.

Tim Wolfenden, Head of Home Services at uSwitch.com comments: “Consumers cannot afford to breathe a sigh of relief yet – the way the market is looking at the moment, we can expect a second round of energy price hikes which could add up to 10% or £105 to household bills. Increases in the cost of gas on the forward market will make further price rises inevitable before the end of the year – the industry has margins to protect and shareholders to satisfy. It will not meet all the cost out of its own pockets and is likely to ask customers to help cover the burden.

“Consumers have got to start looking out for themselves and shield their households now from the effect of future rises – if you are still on an expensive standard energy plan or on a pre-payment meter then your supplier will be reaching more deeply into your pockets than it would be if you were on an online plan. There are still savings of up to £325 to be made by switching. So, check out the options, make sure you are getting the best deal for your household and try to reduce energy usage – in a time of rising prices this will be your best hope.”