Is now a good time to change energy provider?
EDF Energy has announced it is cutting the cost of its fixed-rate energy tariff by an average of £65 a year, making it the latest provider to pass on cheaper crude oil costs to customers.
The energy provider, which is the fifth largest in the UK, has relaunched its tariff with a reduced average annual pricetag of £1,107.71, down from £1,173.05. The price cut makes EDF’s fixed-rate energy tariff the cheapest on the market.
The cut comes on the back of British Gas announcing it is slashing its standard tariff gas prices by 10% from 19 February and Scottish and Southern Energy unveiling price cuts of up to 9% from March.
This time last year, EDF - which has over five million customers - put up electricity prices by 7.9% and gas prices by 12.9%. In July, it announced another round of price hikes, this time of 17% for electricity customers and 22% for gas customers.
Energy experts now anticipate that more price cuts will be forthcoming from npower, E.ON and Scottish Power.
Joe Malinowski, founder of energy price comparison website theenergyshop.com, says: “This is a clear steer of where prices are going – and that’s down. EDF previously offered the cheapest fixed-rate tariff and, by undercutting itself, it is setting the tone for what is to come.”
Are you paying too much?
But there are concerns that many households, which are paying over the odds for their energy, might put off looking for a new deal until all the six big providers have laid their cards on the table.
Gareth Kloet, head of utilities at Confused.com, says that energy companies are in no hurry to reduce prices, despite the massive hikes seen last year while crude oil was so expensive.
“It will not benefit consumers to hang around in the hope that their supplier will drop the price of the tariff that they are on,” he adds. “As long as customers choose tariffs which will not penalise them with exit penalties, there is no reason why they cannot switch now and then switch again once all of the ‘big six’ energy companies have shown their hands.”
Malinowski recommends people consider British Gas’ Websaver energy deal, which is guaranteed to be 10% less than the price of its standard tariff.
“This might not always be the cheapest deal out there but it’s much more competitive than current prices and if British Gas cuts prices again down the line, then people with this deal will also see a reduction in cost,” he explains. “Plus, you can pick up the savings sooner and ride prices on the way down.”
There is a downside, however, in the form of an £60 exit penalty if you cancel your contract before September 2009.
In a fix
Malinoski warns consumers against opting for a fixed-rate tariff at the current time: “There is no sense in fixing in a falling market. Fixed tariffs have reduced in price before standard ones, but even taking this discount into account you could lose out down the line.”
However, Will Marples, energy expert at uSwitch.com, disagrees. “Fixed price deals offer security against price rises in the medium to long-term,” he says.
“This peace of mind comes at a premium and customers must consider whether that is more important to them than the benefit of switching now to one of the cheaper online deals, which offer significant savings even after paying any exit penalties that may apply."
Research from uSwitch.com shows that people who signed up to competitive fixed price plans last summer would have to see energy providers cut their prices by £185 a year (16%) before it's worth them moving.
But those who signed up more recently are likely to be paying over the odds for their energy, it says.