What should I do about rising energy costs?

As the temperature plummets and the heating gets knocked up a notch or two, energy bills are back on the agenda.

While bills aren’t quite as high as they were at the height of the energy crisis last year, the fact remains that for most of us, paying for gas or electricity is a pricey business. What’s more, it’s likely that the average bill will be over £1,700 for a good four months yet, though we may see a few drops later in 2025 (when it’s warmer).

All of this means you might be considering switching or fixing your energy bills in the coming weeks. But is this a good idea?

With a cold winter in prospect you want to be able to afford to heat your home (Picture: Adobe)

It’s time to give the crystal ball a polish, because deciding if you want to switch and save involves a bit of economics and a bit of guesswork. There are some potentially better deals to consider at the moment – but there are always catches.

Let’s start by looking at the three main types of tariff:

• Fixed rates. This is where you ‘fix’ a price for gas or electricity for a set period of time. This stops the rate from increasing during that period, but it means if prices drop you will be paying more.
• Standard variable rates. This is where the amount you pay fluctuates in line with the price your energy provider sets. This cannot be more than regulator Ofgem’s price cap.
• Economy 7. Often overlooked and misunderstood, Economy 7 sets two rates – a day and a night rate. This encourages you to use energy when demand is lower and it’s cheaper (at night). So if you have storage heaters this can save you cash.

There are three main options to consider when choosing the best deal for you. Switching to another energy provider, fixing bills with your current supplier and loyalty schemes. Don’t make any decisions without taking the time to read about how the deals work and what the terms and conditions are.

Energy suppliers can’t use reduced rates to tempt new customers. However, your current supplier may be offering a better deal exclusively for existing customers.

Take advantage of the many energy price comparison sites out there. These should give you an overview of the best deals in each of these categories, from most (but not all) suppliers.

The deals on the sites will tell you how much cheaper the current offers are in comparison to the Energy Price Cap (EPC). This is the maximum average amount energy suppliers can charge for each unit of energy and is usually given as an annual ‘average’ bill.

Don’t be tempted to go for the cheapest deal though. You might think fixing your bill at 7% less than the average for 12 months sounds sensible. But the price cap could reduce another three times over a year, leaving you paying more.

Above all else, watch for exit fees. This is the price you pay for leaving a contract early either as a fixed fee or a percentage of the annual bill. Most comparison sites include exit fees now, so factor them in.

Energy bills are complicated – so I’m all about keeping things simple! Here are the four things to watch for when looking for a new energy deal.

• · Duration. How long is the contract?
• · Discount. How much are you saving over the term of the contract?
• · Volitivity. Are you tied to a deal that can go up as well as down?
• · Exit fees. How much do you have to pay to get out of the contract early?

No one can say for certain what the next year will hold when it comes to energy bills. But if you want a bit of security from rising prices, then fixing might be for you. Just check to see what the price is for bailing on the deal.

Martyn James is a leading consumer rights campaigner, TV and radio broadcaster and journalist. Read more from him at this link.