Lower Energy Prices: Is the Deal Done?
Published: 23 April 2012 By MoneyHighStreet Staff 1 Comment
In early April of 2012, Deputy Prime Minister Nick Clegg announced a deal with the biggest six energy providers in the UK that could mean lower energy bills for millions of consumers.
The basis of the agreement is that these providers will have to communicate more openly about which tariffs would be the absolute lowest ones for consumers, which could prompt energy users to switch more easily.
The information would be conveyed in a yearly letter to each consumer, meaning that he or she would have the opportunity to make decisions about which tariff to sign onto even as the energy market changes. At a time when nearly eight million UK families find themselves in fuel poverty, a state in which they simply do not have enough money to cover their energy bills, the change in policy could be a big step in helping families financially.
A new study found that 70 percent of energy customers are paying more than the cheapest possible tariffs that they could, and the independent price comparison company uSwitch found that the average annual energy bill has crept up to more than £1,200. By having readily available information about which rate is economically more sound, the big six energy suppliers could make the process of switching more intuitive and less frustrating, thereby relieving some of the financial pressures caused by rising energy prices.
The change also encourages energy providers to give consumers information about how to lower their tariff with more modern payment methods. Consumers who pay their bills with direct debit or manage their accounts online are more likely to get discounts, for example. Also, the agreement between the deputy prime minister and the big six highlights the importance of consumers doing their own research through independent comparison services.
The news could also help improve consumer attitudes about the energy industry as a whole, which would be a much needed image makeover. In a recent survey, uSwitch also found that one in four households has been wrongly billed for energy usage over the past two years, an instance that could mean that consumers are overpaying or that they have to face the burden of finding extra money to resolve an outstanding bill. On average, the process of fixing a billing error takes two months, but some customers have had to contend with fixing this kind of mistake for up to a year.
As consumers prepare to make the switch based upon this newly available information, it is important for them to remember that each company offers several kinds of tariffs, and that it is also necessary to compare tariffs amongst several different providers. The differences between energy companies can be as much as £300 when considering all tariffs.
Ultimately, whether electricity prices will fall depends very much on you because what Deputy Prime Minister Clegg announced relies heavily on consumers taking a proactive approach to their energy bills. The information will be a helpful tool, but they must still make the decision to act upon it in order to get cheaper service.