Save £££ with an online energy plan

You can save hundreds of pounds on gas and electricity bills with an internet-based energy plan.

In a boost to energy users across the nation, the energy regulator Ofgem has ordered energy providers to send out statements every year that show both our energy bills and the discounts we can get from changing to another one of the supplier’s energy schemes.

This is obviously good news, but it comes with a huge caveat. These statements do not need to show information about the best online energy deals on offer. Yet that’s usually where the biggest discounts are.

Consumers could save hundreds of pounds from their energy bills simply by changing to an internet-based provider. Some energy companies clearly don’t want us to know about this. So, here are a few general tips on finding the best-value online energy deals, and my guide to the best deals around at the moment.

Use combined payments

It’s almost always cheaper to buy gas and electricity together, rather than separately.

A check for my home area (south Cheshire) shows that for a medium-sized house the cheapest gas-only deal is npower’s Sign On-Line 20 at £629 a year, while the cheapest electricity-only deal is Scottish Power’s Online Energy Saver 11 at £279 a year.

That’s a combined spend of £908. Compare that to the cheapest deal for gas and electricity together, which is first:utility’s iSave Dual Fuel V5 at £877. So there’s a £31 difference. That difference can get much larger depending on where you live and how much energy you use.

It’s also worth noting that all of the deals mentioned above are internet-based deals.

Think long and hard before getting a fixed-tariff plan

There are advantages to getting a fixed-tariff energy plan. You get much more security, as you know exactly how much you will have to pay back. Energy prices are also increasing at the moment, as we explained in Energy prices are about to rocket, and having a fixed-tariff plan means that you won’t get an unexpected hike in your tariff if your energy supplier decides to up the cost.

Yet I wouldn’t recommend going for a fixed-tariff plan at the moment. Firstly, you’ll probably pay more for the added security you get. The cheapest fixed-priced tariff for gas and electricity combined in my area is Ovo Energy’s New Energy Fixed at £1,009 a year.

That’s a whole £132 more expensive than the cheapest variable-tariff plan, first:utility’s iSave Dual Fuel V5.

The other big drawback with fixed-tariff schemes is that they reduce your flexibility. Many of these schemes force you to pay a penalty if you decide to leave the scheme early. The Ovo New Energy Fixed deal, for example, charges a £30 cancellation fee for each fuel (ie gas or electricity), so that would be £60 in my case. Ouch!

Some variable-tariff plans have cancellation fees as well, but many don’t. It’s always worth checking this, as if there’s no fee, you will have much greater flexibility in moving around deals.

Pay by direct debit, not by cheque or cash

Using a direct debit will give you a considerable saving, and this applies even if you haven’t got an internet-based scheme. Age UK director Michelle Mitchell said in July that older people would pay on average £100 more if they decided to pay by cash or cheque instead of direct debit.

It’s not rocket science. Processing a cheque will cost your supplier more than procressing the payment electronically, so they’ll charge you more for the privilege. You can find out more about what’s happening to cheque payments in the future by looking at What the death of the cheque means for your wallet.

Get an online deal

My final tip is to get an internet-based plan, where there are no paper bills and you check your account on the internet. It’s much easier for the supplier, and it cuts the price for you.

Top 5 Online Energy deals

Here’s my list of the best online energy deals around at the moment. It’s based on the prices for a gas and electricity combined deal for a medium-sized house in south Cheshire.

(* Service ratings from lovemoney readers on 19/11/10)

In terms of price, all of these easily beat the cheapest British Gas deal, the WebSaver 10 Dual Fuel, which costs £1,042 a year.

If you’re looking for good service, then the best deal here is the EDF Energy one, which was given a resounding five stars for service from lovemoney readers. But the first:utility deal is £85 cheaper, and its service rating is still a respectable three stars.

Going for an online energy plan is one of the easiest ways to save money on your bills. Don’t miss out! It's also worth checking out Get cash for switching your energy tariff to find out about possible cashbacks when you switch your energy tariff.

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More: Energy prices are about to rocket  I The utilities tariff that tricks you