Do you understand how your electricity supplier works out the price you pay? Do you know whether you could save by switching? Let us take away some of the confusion with our guide to electricity prices.

Electricity Prices - A Switchd Guide

Here are the answers to some of the most common questions about electricity costs:

Why do tariffs change price?

Your electricity suppliers charge different amounts for your fuel because they buy in bulk, in advance on the wholesale market. They each bid for the amount of electricity that they think that their customers will require - then they buy it from electricity generators at the market price. The more they buy, the more they save. If prices start to fall, then they can offer better deals to new customers. On the other hand, if prices begin to rise and they did not buy enough electricity then the prices they charge their customers must rise in turn.

Why are prices are rising right now

Although there are a number of sustainable energy sources, most of our electricity is generated by burning fuel – predominantly gas. As the price of the fuel rises, so does the electricity price. The costs to energy companies of setting up new, cleaner electricity sources such as wind farms are also passed onto the customer. There are many other factors affecting price, such as:

• Spark energy has gone bust. As a result, all of their customers’ credit balances have to be refunded by law. The other energy companies share this cost.
• Some of the smaller energy customers are having to raise funds so their prices are getting higher.
• Some suppliers charge a higher amount to their customers in winter in order to ensure they are not building up a debt to be paid off in the warmer months.
• The recent explosion of smaller suppliers led to a price war as they attracted customers. Now they are having to revert to the market price to recover their loss-leading investment.

Why do electricity prices differ between regions?

Across the UK there are wide regional variations in the cost of electricity. Three things drive this:

1. The amount of energy that the supplier buys from that area’s electricity generators.
2. How much electricity the supplier sells in each region. The more electricity they sell, the lower the price they can charge;
3. The charges that the local distribution network makes to your energy company – which can make up as much as a quarter of your electricity bill.

Am I better off on a Standard, Fixed or Variable tariff?

• The “standard variable tariff” is what the bigger energy suppliers tend to switch their customers onto automatically after their fixed price deal has ended. If you have not switched supplier recently, or never switched at all, you are probably on the standard tariff. Standard tariffs are invariably the most expensive. If you are on a standard variable tariff it almost always pays to switch electricity supplier!
• A fixed tariff gives you the peace of mind that your electricity costs will stay the same for a year or more. You are protected from price increases for that time, albeit you often pay a premium to lock in this rate – its insurance against price rises. Beware, though: the price stays the same even if electricity prices fall. As you have agreed to stick with the supplier, they can charge you to leave. It can cost up to £30 per fuel to switch before the end of the deal.
• Variable tariffs are common with newer, smaller energy suppliers. They charge every customer a variable price for electricity. As the price of fuel rises and falls, so does the amount the customer pays per KW.

It’s hard to say which is best. Some people prefer to know they are protected from price rises; others are prepared to hedge a bet against prices falling. Don’t discount switching to a variable tariff. It can be a good deal as they tend not to attract a fee for switching, so you can switch supplier as soon as you find a better deal.

Should I stick with the Big 6 or Choose a Small supplier?

The big 6 suppliers offer certain benefits. They are household names, and their size means they have bigger buying power. They tend to have strong customer support networks, and they can often offer added extras. Services such as boiler repair cover are offered at a discounted price to their customers. On the other hand, smaller suppliers often offer cheaper prices by cutting out the bureaucracy of a big organisation. Several specialise in certain types of fuel – such as renewables. If you do not need added extras and are happy not to have a call centre in the event of a problem, a smaller supplier may suit you.

How Switchd gets you the best electricity prices.

Switchd is a service that keeps track of energy prices and uses sophisticated technology to ensure you are always paying the best price for electricity. The service uses its expertise to protect you against the variability in prices. You don’t have to worry about the amount of electricity you use. We can compare fixed or variable rates: you can leave it to us to constantly monitor the market. As soon as you can save money, we will automatically switch supplier, so you are getting the best deal. We take care of everything - so sit back and relax, knowing you are always paying the best possible price.

Switch and Save on your Electricity

If you haven't changed the supplier of your electricity in the last year or so, you are probably paying too much for your energy. Switching is simple, so why not get some quotes today? If you choose Switchd, and you can have the confidence that our algorithm is working away behind the scenes, so you will always pay the lowest prices.