Time to review your electricity tariff

Time to review your electricity tariff

When Covid 19 struck earlier this year, the wholesale cost of electricity fell sharply. But recently the price of power has been moving upwards. In October electricity traded on the main wholesale market was 17% more expensive compared with the same month last year.

Prices are set to remain under pressure this winter. That’s because of a tightening squeeze of the margin between the amount of power we require and the generation available to meet that need during periods of high demand. The source of this problem is Covid. Restrictions put in place as a result of the virus mean that generators which would normally have undergone maintenance during the summer are having to go on outage in the winter to get the work done.

When wholesale prices rise, it’s not automatic that retail charges will follow suit. It depends on a range of factors. Hedging enables suppliers to insulate themselves from price movements. It depends of course on how much protection they have acquired. Suppliers may also choose to absorb the price increases but they’ll only do that up to a certain point.

The possibility is that if wholesale prices soar this winter, some tariffs may go up. How well can you protect yourself from this risk? You may have heard of but not be familiar with year long discount contracts which are now quite common? These are not fixed price contracts, a fact the suppliers make clear. On the other hand they do provide a guarantee.The promise is not that the price you pay won’t move but that the discount will remain the same for a year. If the underlying reference price, typically a standard rate, increases then you will pay more.

While discount contracts do not safeguard you from higher bills, they do provide a form of protection. That’s because some of these contracts are offering such big discounts, unless the reference price is really hiked, they should continue to offer reasonable value for money.

The very best discount deals are only available to credit customers paying by direct debit with online billing. I’d single out several credit tariffs which I think currently offer especially good value. Budget Energy has a Budget Bonanza deal. A household using a typical amount of electricity (3,200 units) would pay £480 a year.

The bill for SSE Airtricity’s 20% discount deal is £485 while the annual charge for Electric Ireland’s Simpler Living Discount is £507, both figures also based on standard consumption. These latter two tariffs are only available to new customers.

There is however a supplier which has fixed a competitive price for a year. Click Energy's Big Birthday Tariff is guaranteed to stay the same for twelve months. A household on standard consumption would pay £514 including standing charge for a year's supply. It's open to new and existing customers ready to pay by direct debit. The company says the deal is only open for a limited time.

The quickest way to check what’s on offer is to use a price comparison site. enirgy.info has one but there are others. I think it’s best to check with a couple of sites. Lastly if you do not accept our terms and conditions, you should not use the enirgy.info calculator.

Published on 15/11/2020

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