Our friends electric, and gas
One significant cost that households have, and that they need to understand, is electricity and gas utility costs. It is our third highest essential spend after groceries and council tax.
Back in April 2019, according to energy market regulator Ofgem, the average dual fuel variable tariff was £104.50 per month, or £1,254 a year, but the cheapest tariff available was 30% cheaper. In September 2019 I ran a price comparison based on UK average household kWh usage. The standard cost for our then current provider was £1,197 but the cheapest tariff was 20% cheaper.
We have lived in our current home for almost thirty years now and have spent over £36,000 on these utility costs. Our costs in 2024 were 243% higher than in 1996 which compares with an 154% increase in inflation (RPI measure). Over those twenty-nine complete calendar years our actual total costs were some 8% higher than a calculation of our 1996 costs uprated for RPI each year. Most of this has arisen since 2020. During these twenty-nine years we have moved from a two-person household to a four-person household. We have moved from no one being at home during weekdays to someone being at home most days. We did have to buy a new central heating unit and have added some double glazing, so efficiencies from those have maybe helped to cover these greater demands.
Initially we stayed with the default energy providers for our area but after significant increases of 27% in 2005 we then began switching providers every year or every other year to control or reduce our costs. From 1996 to 2005 our utility costs rose at a compound rate of 3.63% compared to 2.58% for RPI inflation, then from 2005 to 2020 our utility costs rose at a compound rate of 2.12% compared to 2.84% for RPI. During the recent cost of living crisis from 2020 to 2024 our utility costs rose at a compound rate of 16.09% compared to 7.34% for RPI.
In 2019 we initiated another energy switch as a two-year deal ended. We repeated that a year later. Unfortunately, the changing energy markets resulted in both companies going bust just as we switched. We were then placed with Octopus Energy. We were no longer able to switch providers to save money. We were in effect held captive to a price fixed by the government. In 2023 after the Russian invasion of Ukraine our energy costs rose to be 118% higher than in 2020. These costs fell in 2024, but they are still 82% higher than in 2020.
We can’t be certain of how much we have saved by continually switching between 2005 and 2020 but if we saved 20% against the default costs, we may have saved nearly £5,000. It was worth taking the time to switch providers with such a good payback for such little time.
Switching is beginning to be an option again, although we have only switched to a twelve-month fixed deal with the same provider which may save us 9%.
We look to the Money Saving Expert website founded by Martin Lewis, but now part of Money Supermarket, and its own comparison tool the Cheap Energy Club. You need to know your annual usage of electricity and gas in kWh but that should be provided in a renewal offer from your current provider. Alternatively, you should be able to obtain it from your bills for the last twelve months. Checking the comparison tool today there are no deals better than our current one. The 58 deals would add between 0.35% and 34% to our costs. When our current deal expires then our costs would increase by around 10% so 25 of these deals can beat that. I have diarised to look at this again in nine months’ time.