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Energy price fix deals 'a no-brainer'

The UK Government this week published its plans for reform of the electricity market, but was accused of doing little to lower household bills.

Lucy Darch, director of energy at uSwitch.com, said: "The Government is attempting to balance security of supply, a low-carbon future and affordability. Something has to give and unfortunately at the moment the scales are tipping away from affordability. Our concern is that consumers will become the forgotten part of the equation."

Meanwhile, energy prices look set to rise again, with two of the big six suppliers hinting at likely increases. Centrica, which owns British Gas, the biggest energy company in the UK, recently warned of higher wholesale gas prices, which could affect energy bills as early as next winter. SSE has also pointed to the rising trend in wholesale prices.

Energy price hikes would put further pressure on cash-strapped consumers. Utility bills went up by about 20% last year. Price falls at the beginning of the year were welcome, but only cut about 3% off the average bill, which is now £1252 a year.

The cost of household energy has rocketed more than five times faster than household income since 2004, according to research from uSwitch.com.

The average household income in the UK has gone up by 20% since 2004, from £32,812 to £39,468. But the average household energy bill has shot up by 140%. The size of utility bills is now the top household worry, ahead of the rising cost of food and even mortgage payments.

The suggestion of price hikes has therefore alarmed some consumer groups. Gillian Guy, chief executive of Citizens Advice, says: "The prospect of further rises in fuel bills will be a huge worry for many people who are already struggling to cope with last year's increases.

"Many household budgets are at breaking point and we urge British Gas to think about its customers and the pressure any rise will put on their finances. Energy companies need to keep prices as low as possible to avoid more people being pushed into fuel poverty or debt."

Trisha McAuley, deputy director of Consumer Focus Scotland, says: "Greater transparency on costs, pricing and profits is needed for customers to know whether they're getting a fair deal. Wholesale prices go up and down but customers need to know this is accurately reflected in their bill."

Household utility bills are top of the list of baffling documents, according to Gocompare. A number of companies are seeking to reassure households that their energy bills will not jump immediately. E.ON, for example, has promised its five million residential customers that it will not raise prices this year.

SSE has also agreed to a price freeze until October.

But the reprieve is likely to be short term. The cost of some online deals has already started to creep up. ScottishPower, for example, has recently pulled its Online Fixed Price Energy July 2013 at £1055 a year.

The replacement Online Fixed Price Energy August 2013 will cost £1086 a year on average – an increase of £31.

Tom Lyon, energy expert at uSwitch.com, says: "Online plans are always competitive, but because they are so keenly priced they are also the first to reflect any volatility in the market, which is why we have started to see online prices creeping up.

"The good news though is that online plans still offer a £161 saving on standard prices."

The threat of rising prices suggests now could be a good time to check your energy tariff and switch to a better deal to save money. Experts recommend a fixed price plan as protection against future hikes.

Scott Byrom of MoneySupermarket likes the Blue + Price Promise from EDF Energy.

The deal is fixed until September 2013, but there are no termination fees should you want to switch any earlier. Also, EDF Energy will tell you when you can save £1 a week or more by switching to a better deal on the market – even if it means you switch to a rival utility firm. Byrom says: "The EDF fixed plan costs the typical household about £1054 a year, so it is only £27 more than the cheapest variable deal, which is of course at risk of price increases. So it really is a no-brainer."

Or, there's the iSave Fixed Price v2 September 2013 from First Utility at £1047, also fixed until September next year.

If you switch before the fix expires, there is a fee of £30 for each fuel. The cheapest variable tariff is also from First Utility, the iSave Dual Fuel V10 at £1027 a year.

Mr Lyon says: "Thankfully the decision whether to fix or not is pretty straightforward at the moment as there are some keenly priced fixed price plans on the market."

He adds: "Consumers can get a competitive price and enjoy protection from potential price hikes. It also means that if prices don't go up, they won't have lost out because they will still be on a very competitive deal."

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