Five reasons energy bills will go up imminently

Five major signs have combined to make energy price rises in the near future almost inevitable.

"The market trend and rumour mill" is pointing to higher prices in summer, according to energyhelpline, and perhaps half a million customers will be coming off their energy tariffs just in time to be hit by those higher prices.%VIRTUAL-SkimlinksPromo%
According to energyhelpline there are five signs that are leading many to conclude that price rises are inevitable. They make a compelling case:

1. Industry signals and conversations
energyhelpline watches the gas and electricity suppliers' media and trading statements "like a hawk" for signals in price moves. Matt Ridout from the firm told me: "There have been a number of signals in trading statements since New Year scarily reminiscent of last year when a similar pattern preceded the 5%-10% price rises in late summer/autumn".

He specified British Gas as one example.

2. The longest ever winter
January and February were colder than normal, and March was the coldest for 60 years. Ridout said: "As we were still getting conditions below freezing well into April, this winter has been described by some as the longest winter in history."

Ridout predicted my next thought: that colder winters should be good news for energy companies. Indeed, gas usage spiked in March and over the winter it was 15-20% higher than normal and so sales were up.

"For some energy companies this may be good news," said Ridout, "but for many they had to buy in lots of extra gas at very high prices to serve customers when the market was at its peak."

Suppliers tend to make the bulk of their profits in winter, but some suppliers told energyhelpine that March wiped out most of their winter profits.

3. Transmission & distribution costs
The costs of the "pipes and wires" keep on rising. National Grid, which runs these connections, bills the energy suppliers, and our suppliers pass the cost on to us. National Grid has just reported mega profits for shareholders, up 13% per share.

Ultimately, we're going to have to pay for those profits.

4. Environmental costs
These keep on rising too, says Ridout.

"The money to subsidise wind farms, free insulation and solar panels has to come from somewhere. Unfortunately it's a levy on suppliers that ends up in your bill. One newspaper article calculated these costs could be as high as £600 per home per year by 2020."

5. Wholesale costs
The price at which energy companies buy energy to sell on to us was high over the winter and the forward prices for next winter also remain high.

18 tariffs expiring this summer
Alan Clarke of Scotiabank has estimated that some of the above will cause energy bills to rise by £100-£200. The greatest shock might come to those who have become accustomed to fixed rates, or who shopped around for cheaper deals a while back but fail to do so again. From paying some of the lowest prices available, you might now face paying your supplier's hefty default rates, which are going to be even more expensive if the "inevitable" happens.

EDF's Blue +Price Promise, expiring in September 2013 particularly stands out in my mind, since that was one of the energy tariffs available to new customers last summer that was cheaper than even the cheapest variable tariff in some areas. Indeed, several fixed tariffs last summer were very cheap.

Ridout believes the largest batch of customers will be leaving EDF's tariffs. He estimates between 300,000 and 500,000 households will see their tariffs expire in summer.

You can see the list of tariffs expiring soon in the table below. Most of these are just one or two years old. If you've been on the same tariff for even longer, it's very unusual for you to still be getting a good deal.

Suppliers

Tariffs

End date

British Gas

Fixed Price June 2013

01/06/13

British Gas

Online Variable August 2013 with Energysmart

31/08/13

Co-operative Energy

Fixed July 2013

31/07/13

E.ON

Fixed Price 5

01/07/13

E.ON

Age UK Fixed Price July 2013 (Dual Fuel)

01/07/13

E.ON

Fixed Price Saver June 2013

01/06/13

E.ON

Age UK Fixed Price Saver June 2013

01/06/13

EDF Energy

Fixed Price 2013

30/09/13

EDF Energy

Blue +Price Promise September 2013

30/09/13

first:utility

Smart as Standard Fixed V4

30/06/13

first:utility

Smart as Standard Fixed V5

30/09/13

npower

Go Fix 12

31/08/13

Sainsbury's Energy

Online Price Freeze June 2013

30/06/13

ScottishPower

Platinum Fixed Energy October 2013

30/09/13

ScottishPower

Online Fixed Price Energy July 2013

30/06/13

ScottishPower

Platinum Fixed Energy July 2013 NSC

30/06/13

ScottishPower

Online Fixed Price Energy August 2013

31/07/13

ScottishPower

Fixed Saver September 2013

31/08/13


What to do now
The cheapest tariffs that are still available to new customers tend not to rise in price at the same time as older or standard tariffs. That's why the typical guidance you read on money websites – wait until all energy companies' price announcements have been made before switching – doesn't make any sense. Those announcements only refer to the more expensive tariffs.

So you don't have to wait for the long months it takes all suppliers to roll out their price increases if your tariff is expiring this summer.

The good news is that if you switch this summer and later your supplier says it's increasing the price of your tariff, you're normally allowed to leave without exit penalty, even if your tariff comes with penalties for leaving in a specified time period. You have to notify your supplier and begin your switch quickly though. Also beware of npower's hidden exit penalties that you can't so easily avoid even if it increases prices, as I explained in more detail in Energy tariffs to avoid.

Cheap tariffs include new small supplier Flow Energy's Thames Fixed Online Sept 2014, which is not only fixed but is currently the cheapest tariff for many customers. So far it's too early to know how good Flow Energy's customer service is.

The other fixed deals I've seen close to the top of the table all last around one year to 18 months, and they are between 5% and 10% more expensive than the cheapest deal. In recent years, my research has found that such a price difference has been too high to justify a fix, even if prices rise more, because you start paying higher prices sooner with the fixed deals. However, the future might be different and, for you with your specific energy usage and postcode, the price difference with some fixes might be smaller when you do your own online price comparison.

To see which tariffs are available in your area, use the Lovemoney gas and electricity comparison tool.

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Beware the small print
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Five reasons energy bills will go up imminently

It is reasonable to assume that if you take out a mobile phone contract at £30 a month for 24 months that's exactly what you'll pay unless you exceed the tariff. Yet mobile phone providers have come under fire for a snag buried in the small print – a clause to allow mid-contract price rises.

Prices are rising by a median of 81p a month and 70% of consumers are completely unaware off this sneaky move, according to Tesco Mobile, so be sure to check any new contracts before you sign the dotted line.

Financial service providers always refer to 'typical APR' in advertising to attract customers with favourable rates of interest.

Yet the typical APR on loans and credit cards is only available for those applicants who have a squeaky clean credit record, everyone else could end up with a much higher rate. For example, under EU rules, credit card providers only have to provide the typical APR advertised to 51% of applicants.

So always consider this when applying for accounts and products, and if approved – look out the actual APR that you will be charged.

The highest paying savings accounts on the market tend to come with a string of strict terms, which if you fall foul of, result in a drop in interest. Common requirements include paying in a set sum each month and not making withdrawals during a set period.

Make sure to fully understand these terms before opening a savings account and if you choose an account with a six or 12 month bonus, remember that this will plummet when the bonus period ends.

Cashback credit cards that pay you a small percentage each time you spend on the card are full of loopholes in the small print. All have a maximum spend, but many have a minimum spend too.

For example, the Sainsbury's Cashback Low Rate card advertises that it offers users 5% cashback for the first three months. However the 5% cashback is capped at £50 a month. A further 5% cashback is subject to you spending £500 a month on the card (£250 of that at Sainsbury's).

Attempt to repay your mortgage early and you may be greeted with a hefty fee in the form of an early repayment charge. These penalties vary from lender to lender and even deal to deal, but are typically be around 10% of the outstanding balance.

Details of any early repayment charges should be clearly outlined in your mortgage contract but it is worth double-checking with your lender before you try to make a payment.

Insurance is an incredibly complex area of personal finance and different forms of cover are riddled with different hitches that make it crucial to read the small print. Failure to do so could lead you to pay for a product you would be never be able to claim upon, or unknowingly do something that invalidates your claim.

Always buy the right level of cover for your needs and pay close attention to any exclusions in the policy wording. For example, many travel insurance policies for winter sports won't pay out for treatment of injuries incurred while under the influence of alcohol.

Think a credit card can't do any damage at home in your drawer? Think again. Some credit and store cards charge a dormancy fee if you don't use them regularly.

For example, all Santander-issued store cards, including Topshop and Laura Ashley cards among others, charge a fee of £10 if you remain in debit for three consecutive months.

Exceed the monthly usage allowance in your broadband deal and you could be hit with a huge fee. Common with the cheapest broadband deals on the market, penalty charges for going over your contracted limit can push your bills up even higher than if you paid for a deal with unlimited usage.

According to Talk Talk, some households are being forced to pay an additional £40 per month for exceeding their usage allowance. BT for example, charges £5 per every 5GB extra used.

Familiarise yourself with the download limit in your package and the penalties for exceeding it, decide whether you are better off with an unlimited deal.

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