FOOL'S EYE VIEW
How To Save Money On Your Fuel Bills

By Maynard Paton (TMFMayn)
January 29, 2002

Carburton Street, London -- "Hello, would you like to save some money on your fuel bills?"

If you've ever been asked that question on your doorstep, it's difficult to say no.

OFGEM, the Office of Gas and Electricity Markets, recently highlighted these facts that concerned the opening up of competition within the energy markets:

* Since competition began, the average domestic electricity bill has fallen from £268 to £238 (11 per cent) and the average annual domestic gas bill has fallen from £375 to £308 (18 per cent);

* 15 million people have switched their gas and electricity suppliers, with almost a million customers now switching each month, and;

* The current rate of switching (38 per cent in electricity and 37 per cent in gas) is higher than in any other comparable industry, including six per cent for current bank accounts, 11 per cent for fixed-line telephones and 12 per cent for mortgages, and second only to car insurance.

However, while all the gas and electricity salesmen will tell you their company is the cheapest, it certainly pays to do some homework before you switch suppliers. When I switched gas suppliers last year, it took me three quarterly bills before I realised that I wasn't getting the "typical savings" that the salesman implied.

Complex charges

When comparing different suppliers, complications arise from the various types of pricing structures.

You see, my old gas supplier had this charge structure...

Cost per kWh (p)                     1.155
Daily Standing Charge               11.510

...while my new supplier has this charge structure...

Cost per Band A kWh (p)              2.167
Cost per Band B kWh (p)              1.243
Daily Standing Charge                0.000

...with Band A being charged for the first 1,465 kilowatt hours (kWh) per quarter, and Band B used for the remainder!

"You see, with our service, you don't have to pay a standing charge", said the salesman (or something similar) as he calculated a rough saving for me by looking at an old gas bill. Furthermore, the salesman also mentioned my saving would be enhanced because I'd be going on a 'dual fuel' pricing structure (my new gas supplier was also (and still is) my electricity supplier), too. Anyway, those "typical savings" all looked good, what without that standing charge and all. So I signed up.

Nine months later, with my gas bill showing no discernible difference, I decided to actually calculate what I should have been saving. Using an estimated 7,660 kWh of gas a year, my old supplier would have charged £130 per annum. Although things are a bit tricky with the Band A and Band B structure, I reckon my new supplier will charge around £137 a year.

Was I mis-sold gas? Well... I don't know. I can't remember what the salesman actually said (I certainly can't remember saying how much gas I used a year -- in hindsight, a crucial figure), and I've yet to have a full year with the new supplier. But at this stage, it doesn't look too good.

The only way I can make money from the supplier switch would be to change to direct debit payments (I currently pay quarterly), which I think will reduce my annual gas bill to around £128. Overall, that would generate a -- wait for it -- £2 saving on my old gas supplier! 

Do it properly

From my experience, if you want to save money on your fuel bills, don't take a chance with the first salesman who turns up at your doorstep with convincing savings projections. There are better ways of making a saving!

Firstly, consider direct debit. Without changing supplier, you can probably save between 5% and 10% a year by paying by direct debit, rather than via the traditional quarterly cash or cheque.

Secondly, shop around. Energywatch lists those websites that offer online energy price comparison services. When using these sites, it's best if you know (roughly) how much gas and electricity you use a year. With so many different charging structures around, you need to ensure you get the right one that suits your circumstances!

And how much can you actually save? A quick visit to buy.co.uk and uswitch.com highlighted several cheaper 'dual fuel' alternatives to my current supplier. For instance, London Electricity can reportedly offer me a £50 (or 16%) per annum saving if I paid through direct debit (though I'll have to consider the annual £62 standing charge!).

Meanwhile, Servista can reputedly save me £77 per year (or 25%) through a very simple, low-cost charging structure. That said, Servista is a relatively young Internet-based firm and your accounts and 'eBills' are only accessible online.

You pays your money and takes your choice!

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