Energy providers profit from home-mover confusion

Fool.co.uk has unearthed a crafty tactic by utility companies that traps homeowners when they move into their new homes.

Around 11% of the UK population move home every year, which means that 2.4 million households are automatically put onto deemed tariffs. A deemed tariff is the standard quarterly tariff, which is typically 25% more expensive than the cheapest offer available from the same supplier.

While switching to a cheaper supplier can be requested on taking over a property, it can take up to four weeks for the billing process to be transferred.

So, with combined utility bills costing around £1,400 a year for a typical three-bedroom house, homeowners are collectively spending 25% or £70 million unnecessarily because they have signed up to a deemed tariff. This assumes homeowners switch to cheaper tariffs within a month.

Homeowners need to be aware that when they move out of their houses and terminate their utility accounts with a final meter reading, the property instantly switches to a default deemed tariff.

When new occupiers take over the property, they are obliged to contact the supplier to register the property in their names. But by so doing, they inadvertently sign up to the deemed tariff. The longer they wait, the greater the amount of money wasted.

David Kuo, Head of Personal Finance at Fool.co.uk, says: "Moving house is an expensive exercise. And the expense in moving can be made more costly if consumers unsuspectingly sign up to penal energy tariffs.

"New occupants should not delay in switching away from deemed tariffs, even if it means transferring to a monthly direct-debit tariff with the same lender first. The longer you wait, the longer you will be on the most expensive tariff.

"It can be easy to forget that you are on a deemed tariff when there are so many other things to remember at the time of moving house. But putting it onto the back-burner could burn a hole in your finances."

Top tips for movers

When you move in - register the gas and electricity in your name on monthly direct debit immediately
Note down meter readings the minute you step over the threshold
Ask the supplier about consumption levels at the new property
Compare providers to identify the best deals
Review providers as soon as you have real consumption data