Act now to cut your winter energy costs!

The heat is on in the energy market, with suppliers cutting the cost of some tariffs to compete for new customers and a new player entering the ring. Here's why now is the time to find a cheap deal that will see you through winter's cold, dark nights.

While some lucky folks have been sunning themselves on summer holidays (and the rest of us have simply been praying for the British weather to stay reasonable!), a host of major energy companies have been busy fighting it out to become the country's cheapest supplier.

However, just last week a brand new energy company entered the market - with a deal that could trump all their efforts!

In this article, I'll look at what's been happening in the energy market recently and explain why you should switch your supplier before the cold weather kicks in!

Market moves

Since July - a time when few of us were likely to be worrying about our winter energy bills - there have been several pricing moves made by British energy suppliers.

Scottish Power, npower, EDF, British Gas and E.ON have all acted to reduce the price of specific deals or launch brand new tariffs.

You might wonder why, at the height of summer, energy suppliers have been at their most competitive in months. After all, this isn't a time of year at which many people are likely to have their heating on - even in the UK!

One reason for this summer's price cuts is the comparatively low cost of gas and electricity on wholesale markets. This dictates how much it costs suppliers to purchase the energy they then sell on to us.

Since hitting a high peak in 2008, the wholesale cost of gas and electricity has fallen significantly - yet critics say households have not benefited from the large cuts suppliers could have passed on.

Arguably, this latest round of price trimming is intended to improve the standing of energy companies with consumers.

In addition, of course, energy companies hope that price cuts will encourage new customers to join them. This is why a key part of their competition this summer has been to take the top spot on energy price comparison tables, such as that here on BeatThatQuote.com.

OVO enters the ring!

Surprisingly, the cheapest deals on offer from big-name energy businesses have been trumped by a new tariff, launched by a brand new energy company.

OVO Energy is the first new energy firm to enter the market in a long time - and it's done so in style, by challenging the big six with a tariff that represents better value for money for some households.

According to its website, OVO intends to prove its commitment to consumers by offering good customer service and providing simple, value-for-money deals that are accessible to existing customers as well as new ones.

OVO is also seeking to demonstrate its commitment to green issues by minimizing its carbon footprint.

In addition, the company offers a 100% renewable energy tariff and says 15% of the energy supplied on its standard tariff, the New Energy plan, will be from renewable sources.

How the competition stacks up

Here's a look at how the cost of OVO's New Energy plan stacks up against the cheapest tariffs on offer from its competitors*.

As you can see, OVO tops the table. Its New Energy plan is on average £5 cheaper per year than the deal on offer from its nearest competitor, EDF's Online tariff version 5.

If you've never switched your energy supplier before, on average you could save over £280 this year by signing up for the New Energy plan from OVO.

In the far right of the table, you'll see notes detailing some of the things you should bear in mind when looking at any of the tariffs listed. Some deals are fixed price tariffs lasting for a year or more, while others are variable rate deals that are worked out by discounting the energy provider's standard rates.

It's important to examine terms and conditions like these before signing up for any deal from an energy provider, to ensure you're getting the best possible deal for you.

Why you should switch now

If you haven't switched your energy supplier within the past six months, I think now is a good time to consider comparing deals and making your move.

You could make a significant saving - and if you've never switched your supplier or haven't done so in a long time, you could end up several hundred pounds better of by ditching your current deal today.

Why it might make sense to fix

It's impossible to accurately predict where energy prices will go next, but there is a chance that increased demand for gas and electricity during the winter months will drive up prices for consumers.

For this reason, some people may choose to opt for a fixed price deal now - particularly when tariffs such as the New Energy plan from OVO look like good value for money.

It is worth remembering, though, that if you lock into a fixed rate energy deal you are likely to face exit fees should you decide to ditch your tariff before your contract expires.

In addition, you won't benefit from any energy price falls that may occur - but this might be a small price to pay for the peace of mind that comes with fixing your rate in advance.

* All annual costs in the table are based on 'medium' energy consumption: 20,500 kWh of gas and 3,300 kWh of electricity per year. Figures are correct as at 4 September 2009.

** All annual savings in the table represent the sum that could be achieved by a household that has never switched suppliers before. Such households are assumed to take their gas from British Gas and their electricity from a local supplier.

**This material is for information purposes only and should not be considered financial advice. We strongly encourage our readers not to rely solely on this content, but to seek independent advice when making financial decisions.**

Tags for this article