Confuse the Market

One thing that has been worrying me lately, what with the price of oil going up and the value of the pound heading South, is what effect this is likely to have on gas and electricity prices. The cost of the various energy suppliers can vary quite considerably depending on whether they are fixed or variable price, whether they have a large or small standing charge and whether there are exit charges tied to a fixed-term contract. It could be quite confusing but there are various websites like Uswitch and Which? Switch to help find the best deals. The problem is, that they can cause even more confusion than they resolve.

On the surface, it looks quite simple and, for someone who is on the standard variable tariffs from their traditional supplier it probably is. The problem arises when one is already on a fixed tariff, potentially with an early termination fee, and which runs out sometime in the next year. If any of these are the case then the price comparison could be misleading; possibly to the point of directing one to a more expensive deal.

I first tried these comparisons out on my mother-in-law’s house. In fact, this was pretty straight forward as the cheapest deal was with her current supplier and both the gas and electricity unit rates and standing charges were lower than she is currently paying and, without the switch of supplier, there is no early termination penalty to pay. Given that she has recently had a new energy-efficient boiler fitted this should lead to a good reduction in her energy bills for the next year.

The problems started with our house. Our current tariff runs through until next May and there is a penalty for swapping suppliers before then. Having plugged the figures into the comparison site it did offer a few tariffs that were lower. I discounted a few as they didn’t take into account the penalty but one did look cheaper that was also with our current supplier. The problem was that the comparison assumed that we would be paying the supplier’s standard tariff after the current deal expired (we would almost certainly not do this) and it also assumed that our energy consumption would be even throughout the year – by far our biggest energy expenditure is for gas consumption over the Winter period.

In fact the tariffs started to become even more complex once the variables of expensive standing charges compared to cheaper unit rates were taken into account. In the end I plugged the various tariff figures into a spreadsheet and came to the conclusion that if I really wanted lower energy bills I’d have to switch of the lights and put a woolly jumper on - which makes a nonsense of trying to compare prices in the first place. However, what the graph from the spreadsheet does show (which the comparison websites don’t) is that there is a definite cut-off point between the two tariffs with the newer one making sense between the end of November and the beginning of April whereas the current tariff makes more sense during the summer months.

I’m not sure that an online comparison facility would ever be able to reproduce that level of detail and it would take someone as obsessive as me to have kept all the data (although a Smart meter might be able to handle this). I suppose it is back to one of those old clichés: Do Your Own Research.