Is switching energy providers pointless?

So far three members of the ‘Big Six’ energy providers have announced winter price rises. Another has admitted it will have to move on price before the end of the year, while even some smaller providers have increased their prices too.

As a result, there’s been a lot of talk about switching and saving. If everyone’s putting their prices up, is switching energy provider actually pointless?

The price rises so far

First to move was SSE, which hiked prices by an average of 8.2%. British Gas soon followed with an average price rise of 9%, with npower this week hiking bills by a whopping 10.4% on average.

Scottish Power has also admitted it will have to increase its prices at some point this year.

Co-operative Energy has announced the smallest price rise at 4.5%, while First Utility has promised no price increases until at least March next year.

"All energy providers are the same!"

That’s the accusation I heard a woman on the train make last week, following the British Gas price rise. Her argument was that energy providers work like a cartel, all increasing their prices at the same time. So switch from one, and you’ll just end up paying the same amount with another provider, making the whole exercise pointless.

This idea that “they’re all the same” is also commonly applied to banks and politicians. You’re going to get robbed anyway, so better the devil you know. It’s an understandable view given the way the Big Six always seemingly follow each other with price rises.

However, the idea that switching suppliers is pointless is absolutely not true.

[How to beat the winter energy price rises]

Who gets hit by price rises?

When an energy company puts its prices up, not all of its customers are affected. My own provider (for now, anyway) is British Gas. But when its prices go up by £123 a year from next month, I won’t be paying any extra, because I’m on a fixed tariff.

It’s only customers sitting on variable tariffs that suffer. So if you fix your energy bills, you are taking control of your spending.

Let’s stick with British Gas. Based on what regulator Ofgem classes as average use, its average customer will be shelling out £1,444 a year on their gas and electricity after the price rise. If you are this average customer, there are a stack of deals that you can switch to that will save your money, as the table below demonstrates:

Supplier	Tariff	Average Cost	Saving vs non switcher's typical bill*	Saving if industry hikes by 8.2%	Fixed until	Cancellation Penalties
First Utility	iSave Fixed v11 May 2015	£1,172	£248	£364	May 31, 2015	£30 per fuel until end of fix
ScottishPower	Online Fixed Price Energy March 2015	£1,181	£239	£355	March 31, 2015	£25 per fuel before fixed end date
EDF	Blue +Price Promise March 2015	£1,183	£237	£353	March 31, 2015	None
npower	Price Fix April 2015	£1,202	£218	£334	April 30, 2015	None
ScottishPower	Online Fixed Price Energy December 2014	£1,204	£216	£332	December 31, 2014	None
E.ON	Fixed 1 Year v4	£1,222	£198	£314	12 months	£10 cancellation fee applies if leaving before the end of the fix
Ovo	New Energy Fixed	£1,226	£194	£310	12 months	£30 per fuel until end of fix
Pioneer	Fixed 12 Months	£1,244	£176	£292	12 months	£30 for electricity if you switch away before the end of the fixed price period
British Gas	Fixed Price October 2014	£1,245	£175	£291	October 31, 2014	£30 per fuel until end of fix
First Utility	iSave Fixed v10 January 2016	£1,274	£146	£262	January 31, 2016	£30 per fuel until end of fix
SSE	2 Yr Capped Price Plan 2	£1,274	£146	£262	24 months	£50 before fixed end date
Pioneer	Fixed 24 Months	£1,277	£143	£259	24 months	£30 for electricity if you switch away before the end of the fixed price period
ScottishPower	Fixed Price Energy February 2016 Online	£1,291	£129	£245	January 31, 2016	£25 per fuel before fixed end date
EDF	Blue+ Price Freeeeze March 2017	£1,340	£80	£196	March 31, 2017	None

*Based on typical gas and electricity bill for someone who has never switched costing £1,420 (Source:Ofgem 2013)

These deals will not only save you money, but give you certainty over the price you pay for potentially four winters. Let’s face it, there’s a decent chance energy bills will have risen further over that period, so you’re likely to save a few quid over both the short- and the long-term.

That doesn’t sound like a pointless activity to me.

Relying on our apathy

Energy providers are like banks in that the more apathetic we are towards shopping around, the more they benefit.

So don’t let them. Shop around and compare the energy tariffs available in your area. If you’re on a fixed tariff like me, make a note of when it’s coming to an end and what exit fees you have to pay. Then, a couple of months before it finishes, begin comparing deals. If you’ll save more than the fee you’ll be charged to leave, switch. If not, wait it out and then move once there’s no exit fee.

Shopping around for energy deals is not a fun exercise. But it’s a necessary evil. And it could save you hundreds of pounds.

[Could you save up to £320 by switching your gas and electricity supplier?]