UK's cheapest region for energy

Robert Powell takes a look at how energy prices differ depending on where you live...

Where you live can say a lot about who you are. But apparently, it can say a lot about your energy bill as well.

That’s because new research has revealed that some consumers could be shelling out an extra £180 per year on fuel bills just because of where they live.

Postcode lottery

uSwitch.com compared the cheapest, most expensive and average online tariffs across 14 UK regions. It found that on average, suppliers vary their prices by £76 depending on where you live.

This means that two customers on the same tariff with the same supplier, using the same amount of energy could be charged differently depending on their location.

As you can see from the table below, Cardiff emerges as the most expensive region for online energy rates – while Brighton comes out as the cheapest:

Source: uSwitch.com

So, households in Cardiff are losing out in this ‘postcode lottery’ of energy prices, paying an average of £1,108 per year for an online tariff.

Brighton emerges as the cheapest area with an average of £1,060 per year. Leeds is slightly behind the South Coast resort with an average price of £1,067 per year.

The biggest regional difference was for E.ON Save Online 10 customers. In Brighton this tariff has an average is £984. While 50 miles up the A23 in London the average is £1,164. That’s a £180 difference for two customers on identical tariffs but in different regions.

Why the gap?

Location-based factors will, to an extent, influence regional variations in price. For example a supplier may offer cheaper electricity rates to customers who live near a power station they own. Or lower gas rates to households located around ports they use to transport natural gas through.

However competition also plays a part.

Suppliers offer their best online deals in regions where they have a smallest market share and want to boost numbers. That’s because online tariffs – usually the cheapest deals offered by a supplier – are only temporary. Energy suppliers are hoping that you join them for a cheap online deal, but then forget to switch out again when the tariff expires and you are pushed onto the pricey standard rate.

Of course, the flip-side to this is that energy suppliers will hike up their rates in areas where they are more successful; essentially subsidising the cheap regions.

Granted, this is slightly unfair if you live in an area with an expensive online rate. However, if a ban were to be placed on the practice, it seems likely that online tariff prices would rise everywhere.

Perhaps we should just be grateful – in the current climate – that there are cheaper deals on offer at all.

Fixed tariffs

The uSwitch.com stats also highlight the variation in online tariffs across individual regions. Even in Cardiff, the most expensive region, there is a £106 difference between the cheapest and most expensive supplier.

However in the current climate, opting for an online tariff may not always be the best option.

Online tariffs are variable deals, meaning that your provider can hike your rate at any point (unless the contract says otherwise). So while the initial price may look competitive, this might not last for long.

Currently the best online tariff is First Utility’s iSave 8. This will cost an average of £1,032* per year, however as the tariff is variable, it could change at any point.

As you can see from the table below, the best fixed tariff around at the moment (Scottish Power's Online Fixed Jan 2013) is only £18 more expensive at £1,050*. And as this is a fixed rate, this price is guaranteed until January 2013.

When the differences between fixed and online tariffs are this small, it seems sensible to fix your rate and not run the risk of future online price rises.

Here are the best fixed tariffs around at the moment:

Source: energyhelpline.com – all tariffs are available from the lovemoney.com energy comparison centre.

In fact, it may even be worth considering a longer fix to 2014 or 2015 – the two final tariffs detailed in the table above. Yes, you’ll pay more in the short term, but if standard and online tariffs rise in the next three to four years – as they may well do – you could make a huge saving by fixing your price now.

But whatever you do, remember to keep switching when any temporary cheap periods expire to ensure that you’re always getting the best deal.

Thanks to energyhelpline.com for information for this article.

*Average usage as defined by OFGEM is 16,500 kWh pa of gas and 3,000 kWh pa of electricity. Actual charges will vary by region and consumption.

** Against a typical bill of £1,300 after this round of price rises. Figures based on average usage as set by Ofgem for a dual fuel bill paid by monthly direct debit.

More: Compare energy tariffs with lovemoney.com | Energy firms hiding cheapest deals while profits peak | Pay nothing for your energy for two months!