How to save money on your energy bills

5 min read

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Sarah Pennells

Consumer Finance Specialist

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Energy bills can be a major expense, but there are some simple steps we can all take to try and keep costs down.

A 'hot' topic

“Energy bills are often a hot topic at this time of year, but a combination of the Covid-19 lockdown and some freezing winter temperatures has increased interest further. A few weeks ago, I was asked to share some tips on reducing energy costs on BBC1’s Rip Off Britain and Channel 4’s Steph’s Packed Lunch. Energy bills can be a real worry for some people, but there are steps that many of us can take to keep down costs. And if you’re in credit on your energy bill, it may be time to ask for a refund.”

Be aware of rising energy prices

If you’re on a standard tariff or pay by prepayment meter, which around 15 million households are, your energy costs could increase from April 2021. That’s because the energy price cap, set by the regulator Ofgem, rises as of 1st April. The cap limits the price that a supplier can charge for a unit of energy, taking into account any standing charge, but it doesn’t cap the overall amount you could pay. For example, a typical customer on a standard tariff who gets both gas and electricity from the same supplier and pays by direct debit could see their bill go up by £96 a year, from £1,042 to £1,138. For a typical customer on a prepayment meter, their bill could rise by £86 a year, from £1,070 to £1,156 a year. 

Find a cheaper tariff

Most of us know that we can save on our energy bills if we switch to a cheaper deal – and over 6.5 million of us switched either gas, electricity or both in 2020. For some people it might seem like a hassle, or you may be worried that your new supplier could go bust. However, if you switch to a supplier that stops trading, Ofgem will appoint another company to take over your supply seamlessly. And, if you’re in credit with your old supplier, you won’t lose that money. Your credit will move with your account to your new supplier and if you don’t want to stay with them you can ask for the money back.

There are several price comparison sites that will tell you the cheapest deal based on where you live, how much energy you use and who your supplier is, so it’s worth doing your research. Citizens Advice also has its own energy comparison tool.

If you’re happy with your current energy provider, you may still be able to save money without switching. Energy companies must, under the rules, tell you if they have a cheaper tariff that could save you money and outline how much you could save. This information is on your regular bill. To switch to a new tariff, you just need to contact your provider and they can arrange it for you. They should also tell you if there are any exit fees, which are sometimes charged on fixed-price energy deals.

Think it through before you switch

Before you switch, there are a few things to consider. It’s worth finding out about the service rating of a supplier before you switch. Saving money on your energy bill is always welcome, but not when you have to spend hours on the phone or online trying to get an accurate bill. The Citizens Advice website has a league table that compares energy suppliers' customer service, which is regularly updated.

For those who have a smart meter, remember that if you’ve got an older style ‘phase 1’ meter it will only stay ‘smart’ when you switch to a new supplier if it’s already had a software upgrade. It will still record the energy you use, like all meters, but it won’t automatically send that information to the energy supplier for you. The newer ‘phase 2’ smart meters should continue to work as smart meters with any supplier. If you like the features of your smart meter, it’s worth checking which one you have before you switch.

Finally, if you get the Warm Home Discount, be aware that the smallest suppliers may not offer it and some energy companies restrict it to certain customers over state pension age – you can check which suppliers are part of the scheme at GOV.UK. The scheme is available to people over state pension age that qualify for the ‘Guarantee’ element of Pension Credit, and to some people on a lower income who get certain benefits, giving you £140 off your electricity bill.

Claim a credit refund

If you pay for your energy by monthly direct debit and you don’t have a smart meter or send in your readings every month, you may be in credit. With the winter over your energy use is likely to fall and, if you’re in credit, that’s only likely to build up over the warmer spring and summer months. You can ask for a refund, providing you give your energy provider an up-to-date meter reading, but you might not always get the full credit amount. Some suppliers require you to have a certain amount in your account and may increase your direct debit payment if you insist on a full refund. However, it’s estimated that around half of all households could be in credit by £100, with one in ten in credit by £200, so it’s worth checking. Find out more about claiming back credit from your energy supplier on the Citizens Advice website.

More on cutting down your bills

It’s a good idea to regularly review your household bills to make sure you’re not paying over the odds. For more information about getting a good deal on your bills, including energy, water, broadband and your mobile phone, read our handy guide.

Get the guide about More on cutting down your bills