Energy prices start to rise!

The first letters have hit customers advising of price increases. Now seems a good time to compare fixed gas and electricity deals with variable ones.

In 2006 we had huge price increases to gas and electricity tariffs. In 2007 we had a small decrease, then in 2008 we saw massive increases, and 2009 there were a dozen tiny cuts. Anyone notice a pattern here?

Who knows whether this will continue for 2010? However, we know that suppliers have many reasons coming up to raise prices. The cost of new infrastructure and additional green-energy investment alone will be huge.

What's more, we have today the first warning. One lovemoney.com reader has just received a letter from EDF saying his tariff price is going up in mere days. Within the first two weeks of the year we may already be at a turning point in pricing!

This means that if we can find a good deal on fixed tariffs it wouldn't be a stupid idea to go for it. Let's take a look at how they compare:

Cheapest tariffs (medium usage in Farnborough)

I've rounded to the nearest pound.

An average household could pay around £900 with the cheapest variable tariff from npower, provided it doesn't go up in price. (Note that the cheapest tariffs are very rarely reduced in price for existing customers.)

In my table are the two cheapest variable and three cheapest fixed tariffs. Take a quick look at the last column. You'll see that all of them are at least 20% cheaper than British Gas' standard tariff, which millions of homeowners are on.

More on each tariff

npower's Sign Online version 17 is the cheapest and it's variable, costing an estimated £904. If you leave before 31/03/11, you'll pay a £40 exit fee. Furthermore, if you leave within the first year you lose £105 of cashback, which would make it much more expensive than the price shown. These are hefty penalties! Also, for the first time, npower will still penalise you if you're switching to another of its tariffs.

ScottishPower's Online Energy Saver version eight is the second cheapest and it's also variable, charging £921 (unless the price rises). If you switch away before 01/12/10 you must pay a £50 exit fee. I think these lower early-exit costs make it more attractive than npower.

Ovo Energy's New Energy version two is fixed for 12 months and costs £927. That's just £23 more than npower's variable tariff. The exit penalty is £60, which you pay if you leave before the 12 months is up. This is the cheapest fix by £8. A possible disadvantage is that Ovo's future is not yet certain; most start-ups don't last long in the energy world.

E.ON's Fix Online version five is fixed for more than 12 months, provided you switch this week. (It can take up to four weeks for any switch to take effect. You'll experience no downtime on services in between.) It costs just £31 more than npower's variable tariff. You'll pay a relatively small fee of £30 if you leave before the fix expires.

Atlantic Online Fixed Price is the third cheapest fix, and it's the longest fix available (excluding two extremely expensive ones). It's fixed till 31/03/11 and costs £940, which is £36 more than npower's variable tariff. It's notable as it's the only fix to take you through the whole of next winter. Exit penalties are not as harsh as npower's but they're still heavy. You'll pay a fee of £75 if you leave before 31/08/10 and £35 if you leave between then and 31/03/11. In addition, you'll lose your 8.5% cashback (£80ish) if you leave inside 12 months.

Choosing a tariff

Prices are not guaranteed to rise. It may be that going for a fixed deal won't work out, but I think it's highly unlikely that prices will fall dramatically this year. Consider that in the past year or more there's been a lot of pressure on energy companies to lower prices and we've still just had small cuts. The greatest risk appears to be to the upside.

On balance, I think I like E'ON's fix best for the combination of a good deal over 12 months and low exit penalties, but the tariff you choose depends on your feelings about risk.

Do your research

The above figures are just examples based on a medium-user in Farnborough, Hampshire. The tariffs available to you, and their cost, will vary depending on both where you live and the amount of energy you use, so you should collect your bills together and do your own tariff comparison.

We have a help button in our comparison tables that helps you to estimate your usage. However, it's much better if you can read how much you use from your own bills.

Before switching, remember to check the exit fees and penalties on your existing tariff.

Compare gas and electricity tariffs at lovemoney.com

Top tips to cut your energy bills

If you want to cut your energy costs, lovemoney.com can help. First, adopt this goal: Cut your gas and electric bill. Next, watch this video on energy tariffs. Then, why not have a wander over to Q&A and ask other lovemoney.com members for their tips on how to cut energy costs?

Finally, remember you can save hundreds by switching energy tariff through lovemoney.com.

More: 25 extraordinary money-saving tips | Avoid budget airline card charges