£200 off energy bills in the spring?

Wholesale Energy Prices Nov 2008

Wholesale Energy Prices Nov 2008


The sell off in wholesale gas and electricity markets has continued throughout November 2008. Over the last 2 months, wholesale gas prices have fallen by 33% with wholesale electricity prices down by 39%. This is still below the 47% fall in dollar oil prices since the end of September but the figures are now looking more comparable between the different fuels.
 
To put the latest price levels into context, we would make the following observations.
 

  • Wholesale gas prices are now only 10% above their 2008 opening levels. This compares with standard retail gas prices which are 50% above their opening 2008 levels.
  • Wholesale electricity prices are now basically back in line with their opening 2008 levels, whereas standard retail electricity prices are 27% above their opening 2008 levels.
  • The spread between wholesale energy prices and average retail energy prices is now higher than at any time since February 2007. February 2007 represented the peak of the previous retail energy price cycle from which average gas bills fell by 14% in the following 4 months (although average electricity bills barely fell 3% over that period).

 
On the basis of current wholesale prices, the scale of potential retail price cuts has increased further. We calculate that there is now scope for average gas bills to fall by around 15-20% (£140 a year) in the New Year with potential cuts of 10% (£50) on electricity bills. This would leave that average consumer about £200 better off and undo about half of the bill increases that we’ve seen in 2008.
 

What we think:
 
The further wholesale energy markets fall, the bigger the scope for cuts in retail energy bills. Based on current forward wholesale prices we calculate that cuts in energy bills could now be in the region of £200 over the next 12 months.”
 
While a price cut off £200 would certainly be meaningful, and would undo half the increases seen in 2008, there is no certainty as to when these cuts will occur or how big they are going to be. The safest bet is to grab a deal by switching now, before the winter bills start to rack up. You can grab a £200 saving now without having to wait for, or rely on, your energy supplier to cut bills for you.

 
Advice for UK consumers
 
(1) As a matter of urgency, review both your energy usage (from your meter) and your bills to ensure that your bills are up to date with your energy consumption. If you are relying on estimated bills you could be building up a big debt without knowing about it.
 
(2) If you pay by direct debit, make sure your direct debit payments have been adjusted to reflect recent increases in energy prices. A word of warning. If your direct debit has not been adjusted for either of the two prices increases of 2008 your monthly payments will need to increase around 70% to make up for the increased prices and the payment deficit that you have accrued.
 
(3) If you have still not switched, then SWITCH. The Ofgem Energy Probe concluded, “On an average basis over the past 3 years, around three quarters of the gross profits of the Big 6, and all of their net profits, arise from their in-area electricity customers,…”. In other words, you’re getting the worst possible deal by being on this tariff. The same can be inferred for customers on Standard tariffs.
 
(4) The cheapest dual fuel deals are £190 a year cheaper that average Standard bills. There are typically no exit penalties and this is our preferred option. You can grab this saving now without having to wait for, or rely on your energy supplier to cut bills for you.
 
(5) Fixed Rate deals generally cost a premium. That premium currently runs from £160 to £371 above the cheapest deal (£13 to £31 a month) and can carry an exit penalty of up to £100 for early termination. In a falling market it makes little financial sense to pay a premium for protection particularly as wholesale markets typically give us a good 3-6 month warning of future price changes. We would avoid Fixed price deals for the time being.
 

Wholesale Gas v Retail Energy Prices Nov 2008

Wholesale Gas v Retail Energy Prices Nov 2008


 
Latest Price Changes
Latest Energy Price Changes Nov 2008

Latest Energy Price Changes Nov 2008


 
Source; www.TheEnergyShop.com
The increase shown is for the average of Monthly Direct Debit and Cash/Cheque bills (excluding any prompt payment discounts) for the relevant suppliers’ Standard tariff based on an average usage profile.
 
Aggregate Increase 2008
Aggregate Energy Price Increase Nov 2008

Aggregate Energy Price Increase Nov 2008


Source; www.TheEnergyShop.com
The increase shown is for the average of Monthly Direct Debit and Cash/Cheque bills (excluding any prompt payment discounts) for the relevant suppliers’ Standard tariff based on an average usage profile.
 
Standard Energy Bills
Standard Energy Bills Nov 2008

Standard Energy Bills Nov 2008


Source; www.TheEnergyShop.com
The bill shown is for the relevant suppliers’ Standard tariff (excluding any prompt payment discounts) based on an average usage profile.
 
Best Deals (26 November 2008) Monthly Direct Debit
Best Monthly Direct Debit Energy Deals Nov 2008

Best Monthly Direct Debit Energy Deals Nov 2008


Source; www.TheEnergyShop.com
 
Best Capped/Fixed Energy Deals (26 November 2008) Monthly Direct Debit
Best Capped and Fixed Price Energy Deals Nov 2008

Best Capped and Fixed Price Energy Deals Nov 2008


Source; www.TheEnergyShop.com
Please note that all Capped/Fixed deals now have exit penalties for early termination. Please see our website for further details.

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