Your household budget accounts for a wide range of expenses, which generally rise and fall according to your habits. With discipline, your hope is to always take-in more than you spend, so your cash flows without interruption. Unfortunately, the winter heating season adds to your cost of living, creating a dreaded annual cash crunch you can’t do much about. Oil and gas prices, however, have plummeted this season, creating budget windfalls you can take to the bank.
Responding to Wholesale Discounts
UK energy suppliers fix prices based on the wholesale cost of delivering energy. As oil and gas prices have fallen on the open market, energy customers continue to see cuts in energy tariffs. Electricity prices are at a four-year low and gas prices are trailing last year’s rates by 25% or more, depending upon your provider.
Energy providers make their deals months and even years ahead, so today’s downward trend in wholesale prices may not be felt on energy bills right away. As a result, the “big six” energy companies have been slower to cite lower wholesale costs. British Gas, for example, the largest national energy provider, is using its advance buys as justification for not lowering rates, stating their contracts are settled as much as three years in advance.
Greater Efficiency Leads the Way
Even without drastic reductions in energy prices, UK customers are saving money. Since 2013, energy use has dropped 9pc overall, due in part to personal energy saving measures. Programmable thermostats and other energy upgrades create more efficient domestic systems, but residents are also changing their behavior in the interest of energy conservation.
By turning off lights and sacrificing a degree or two at the boiler, consumers have made noted headway reducing the call for energy. And since energy costs are driven by economic principles of supply and demand, the reduced draw for energy pushes prices lower.
Competition Props-Up Energy Deals
In addition to the impacts of lower wholesale prices and energy conservation, spirited competition between energy providers is leading to tremendous deals for savvy consumers. Even those locked in fixed contracts are finding savings by switching providers, which often incurs fees.
Web-based comparisons furnish easy access to energy pricing information, which consumers are using to their advantage. Even if you are not committed to changing energy providers, it makes sense to negotiate with your current company. To keep your business, they may be willing to adjust your contract. If not, the pounds spent on exit fees might still be money well-spent.
Though some exit fees cost energy customers upwards of £60, aggressive pricing may make the shift worthwhile. Since the deepest discounts are reserved for new customers, you’ll need to do the math for your particular situation, to see if a change is worthwhile. Companies like Extra Energy and First Utility are offering attractive tariffs for new business, which are priced less than £920 annually. Overall, pricing is typically £10 lower than it was even one month ago. The best deals are currently found in fixed tariffs, but variable rates are also showing discounts, as companies like Ovo Energy respond to lower costs.
With such savings on the horizon, consumers natural look for a downside. Apart from exit fees, savings are fairly straightforward when looking only at the cost of energy. When customer service and other factors are considered, discount providers stand out among bigger name companies, which typically extend more comprehensive customer care.
While future energy costs remain uncertain, some experts predict continuing declines in 2015. Political forces are at play, however, which could influence energy pricing leading up to elections. The relatively mild winter has also clouded profits for energy companies, which may be eager to regain lost ground. For consumers, the best approach is to run the sums and stay tuned-in to fluctuating prices. When it adds up to savings, making a switch or renegotiating your present deal is worth the effort.