The 3 hidden ways energy firms fleece you

Gas hobAndrew Milligan/PA Archive/Press Association Images

We all know the cost of utility bills has gone through the roof as the price of energy has risen. However, this isn't the only reason your bills are becoming increasingly painful. The experts have revealed three hidden ways in which the energy firms are bumping up bills.

So why are your bills so high, and what can you do about it?
Which? has examined bills over the last eight years, and three killer bill tricks mean customers have been paying hundreds of pounds more for their energy.

1. Low users pay more for energy

Energy companies set up their charges so that those who use less pay more for every unit. This can be done in one of two ways. Some companies have a 'standing charge', which is a fixed sum you pay every month - regardless of how much you use. Those with low every use will find the standing charge is a higher proportion of their total costs - and will bump up the average price of every unit.

Alternatively, the company may have two tiers of charges, so you pay more for the first units you use, and then when you hit a particular level, you pay less. Those who use less overall will use proportionally more of the expensive units.

The gap between the cheap and expensive units has widened over time. Npower has the biggest difference between high and low users for gas, Eon for electricity.

Which? Has calculated that on average these techniques mean that low users can spend up to a third more for each unit they use.

2. Paying by cheque is more expensive

In an effort to persuade more people onto direct debit payment plans (which involve less risk and less paperwork for the companies), they have been consistently pushing up the price for paying by cheque.

The Which? research found that in 2004 if you paid by cheque or cash, you would spend between £20 and £50 a year more than direct debit. That figure has now risen to as much as £100. Scottish Power and Eon have the highest costs for cheque or cash payments.

3. Prices vary dramatically across the country

Energy companies have to compete with one another to offer the best deal. It means that in parts of the country served by a large number of suppliers, prices are a great deal lower than those parts of the country where there are far fewer providers. Where there is hardy anyone to compete with, firms can get away with far higher costs.

Yorkshire came out in the research as the cheapest region, while South Wales was the most expensive. On average bills were £40 more expensive here than elsewhere.

Individual energy companies are not shy about varying their prices around the country either. Those with Scottish and Southern Energy in South Wales will pay an average of £148 more for their energy than their customers in Yorkshire.

So what can you do about it?

You can get around the costs of paying by cheque by switching to direct debit payment. It's also less hassle on a monthly or quarterly basis - although you need to keep an eye on how it stacks up against the energy you are using, and whether you are building up surplus cash on your account.

The variation in price is something we cannot do much to control - unless we're willing to move. However, we should be making absolutely certain we have the lowest tariff in our area by shopping around using a price comparison service - and pledging to do this on a regular basis.

As for being charged more for using less energy, a price comparison search will produce the cheapest option for you, and then it's down to finding a way to use even less energy.

According to the Energy Saving Trust there are three simple steps we can all take that require no real effort and could collectively save the country £2 billion. If every UK householder that could, insulated their cavity walls and lofts up to 270mm, replaced old fashioned bulbs with compact fluorescent light bulbs and turned their appliances off standby, they could save £100 a year each.

It's not as satisfying as finding a way to beat the energy companies at their own game - but it is as financially rewarding.

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