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Your Money > Household Bills Articles > Tricks of the...
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By Sarah Modlock
Considering the central heating has been firmly switched off for the last few months, the debate about energy companies and how they treat us has remained red hot all summer. Now, as we come to boiler-switching-on time, there is more need than ever to focus on cutting bills and dodging utility company pitfalls. Here are a few of the tricks of the trade.... 1. Price hikes but not enough price cuts: We are constantly being told that the price we pay is linked to the cost of wholesale energy. Like most markets this rises and falls and when the costs go up, so do our bills. It follows then that our bills should be reduced when the cost comes down. Not so. Even in the face of ongoing challenges from regulator, watchdogs, customers and government, the utility companies continue to do just what they want. The result is that we are being over-charged by almost £100 a year. The reduction in wholesale prices means gas bills could be slashed by up to 10% and electricity by 3.5%, leading to annual savings of £96.40, according to research published by the Consumer Focus watchdog. By failing to pass on the full discounts to every household, power companies are estimated to be making an extra £2.2 billion. So my first tip is an obvious one but it remains important: keep an eye on what you are paying, compare it to what else is on offer and then switch if you think you can save. 2. The 65-day silent loophole: Incredible though it may seem, energy companies are allowed to charge higher prices for up to 65 days before they need to tell their customers. This means you could be building up bigger bills without realising. It's hard to imagine how such a one-sided loophole was ever created. The energy regulator Ofgem is looking into this at the moment but in the meantime it disadvantages customers in several ways. Firstly, we are denied the opportunity to budget for the extra costs and decrease usage if we can. The system also means that it is easier for customers to get into debt, making it impossible for them to switch suppliers and cut their bills when they choose to. There is also the matter of transparency: if you check your meter and try to ensure that your bills are correct then a price change will make it harder to tell if your bill is accurate or not. 3. Dodgy doorstep selling: Grinning salesmen turning up at your home used to be a permanent fixture in the 80s. Everything from double glazing to a new vacuum cleaner was punted on the doorstep. Now it's just energy salesmen who cold call you at home and this is not likely to change any time soon as they are having more success than you might imagine. Ofgem figures show that 41% of people - or 7million households - switch suppliers after a visit from a salesman. The trouble is that the fast sales patter may miss out important information leaving you to count the cost long after they have had their tea and biscuits in your living room. Less than a quarter of those who switch after a visit feel that they got a good deal, Ofgem says. Apart from hidden nasties like 'cancellation charges' of around £30 if you decide to go back to your original provider, the doorstep salesman cannot offer deals as cheap as those on their company's website (well, his wages have to come from somewhere). This can mean you pay as much as £132 more than you need to. It's also crucial to note that salesmen can only offer their own tariffs, not the cheapest tariff on the market. Energy tariffs are based on so many different factors including where you live, how you like to pay and what your usage is - without these details a salesperson cannot sensibly recommend an energy plan to you. With £395 between the most competitive online energy plan and the most expensive standard plan, there's a lot of scope to lose money if you don't do your homework first. Ofgem is currently trying to tackle doorstep energy sellers with tough rules. If one knocked on my door I'd say 'Not today thank you' and shop around online. 4. Bills we cannot understand - or check: Consumer champions Which? have hit out at suppliers for filling energy bills with jargon which make them hard for customers to understand and easier for mistakes and overcharging to go unnoticed. Bills are often use terms like ‘calorific value’ and ‘normal primary units’ without explaining to the customer what these words mean. “Consumers aren’t going to be able to reduce their energy use or find the best deal if they don’t understand what’s going on," says Martyn Hocking, editor at Which? magazine. 5. The direct debit dilemma: It pays to sign a direct debit for energy bills as paying by cheque or even cash can add around £100 a year to your bills. But the system is open to abuse as companies can adjust the payments and stockpile cash if they choose, claiming it is in advance of price rises. Worse still, they may say you have underpaid for months and hike up the monthly payment suddenly, leaving you short of cash. And because energy bills are notoriously difficult to decipher, it is harder to tell whether we're being correctly charged. As a result, many customers have chosen to pay by cheque so that they receive monthly bills rather than the twice-yearly bills sent to direct debit payers. This means that they have a chance to check and challenge the bill before paying it. But they lose the direct debit discount and miss the chance to enjoy their supplier's cheapest online deals, which are conditional on payment by direct debit. 6 Lousy customer service: There are few industries that know we cannot live without them. Unfortunately this is one of them. And so to add to the injury of price rip-offs, payment meddling and tricky sales techniques, there is the insult of dire customer service. Research from Which? reveals that the big six gas and electricity suppliers received some of the worst customer satisfaction scores across all industries this year, coming even lower than banks. It asked customers to rate the companies on customer service, accuracy of bills, ease of understanding bills and value for money. Npower has scored the lowest mark for the third year running at 28%, with British Gas scoring only slightly better at 38%. Interestingly, smaller suppliers scored better, with Utility Warehouse achieving the best score of 75% and Ebico close behind at 66%. Npower fared badly for bill accuracy, value for money and customer service. It has come last in all previous utility surveys. What you can do? During last year's unprecedented price rises which saw average energy bills rise by a staggering 42%, one in five customers opted for a fixed rate deal - a good move for those that wanted to shield themselves from rising prices. But, with wholesale energy prices now falling and many fixed rate tariffs having ended recently or maturing shortly (see table below). If you fixed, you should be considering what to do next, as soon as possible. In the past, the normal default tariff for customers coming to the end of a fixed price, has been the costly standard tariff. However, Scottish Power and E.ON have opted for alternative tariffs for their customers, and the former will impose a £50 exit fee for anyone on a dual fuel tariff, if they have not opted to switch elsewhere by 15 October. This could set a precedent, which means that it's more important than ever for customer to know what they will be switched into if they do nothing at the end of their fixed term and what they could move to instead. Gareth Kloet, head of utilities at Confused.com says: "Standard tariffs are bad enough as they are approximately 13% higher than the best online tariffs. But Scottish Power has made their default tariff a capped one with a £50 penalty to be paid if customers try to switch at a later date. Those whose tariffs recently matured at the end of August, have until 15 October to choose another tariff, either with Scottish Power or someone else, otherwise they will be trapped. Those savvy customers who fixed their energy bills last year, now need to make another decision about what to do in order to continue to save money. Luckily there are a number of very competitive tariffs currently available. Customers should check these out immediately so that they are ready to switch to a cheaper tariff when the term comes to an end and the exit penalties no longer apply" The answer is to shop around to find the most appropriate tariff currently available. This will depend on region and specific consumption and whether customers wish to find another fixed rate tariff or would prefer a discounted variable tariff, chose dual fuel, or pay by direct debit etc.
Best buy table
Source: Confused.com. Prices correct as at 30 September 2009
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