You're making the same mistake again

This time last year, many of you made this costly mistake - and as a result, your bills went up. Don't do it again this year.

Around this time last year, British Gas announced a price cut. As always, all the commentators said that you should wait till all the big six energy providers reduce prices before switching to any new provider.

This 'standard' switching guidance is based on just two factors: a major announcement from one of the big suppliers and the knowledge that, in the past, the other suppliers have followed with changes of their own inside the following three months.

However, I wrote then that you should switch gas and electricity to a new provider (the cheapest, not British Gas) immediately, and later in the year I was able to prove to you that those who waited to switch were worse off than those who switched straight away. Indeed, you had fallen into a trap of the energy companies that is unwittingly perpretated by journalists and energy commentators.

How can that be?

The standard switching advice I mentioned above doesn't take into account two very important things:

1. That we use a lot more energy in the colder months.

2. That when a big-six supplier announces a major change, the change doesn't affect all of its tariffs.

What happened last year?

Last January, British Gas announced a major change in prices: a reduction. Commentators advised to wait till all the suppliers made changes. When this was over (two months later) commentators changed their advice to Switch now!

However, the suppliers had only reduced the price of some of their tariffs, despite the big fanfare. The end result was that the cheapest tariffs before the first announcement were still exactly the same price, and still the cheapest, after all the price changes took effect.

Hence, if you sat on your more expensive tariff for longer whilst you waited for 'the right time' to switch, you would have been paying more money for nothing. And that was during the cold winter months, too!

And this year?

So far, it's the same story . Despite British Gas and first:utility announcing significant cuts recently, the cheapest price that you can pay for your energy is virtually unchanged. Indeed, all my routine tests show that prices at the top of the table are pretty much the same as they were two months ago. Here are the results of one of my tests:

Price test in a Farnborough post code

It's true that for some people prices are very slightly lower now than two months ago. There has been a sliver of cuts at the top as the energy suppliers tinker a little, but it's not enough to justify sitting on your expensive tariffs through the remaining months of cold winter and cool spring hoping for another 2% cut at the top.

Overall, the extra energy you use during the next months, at your current tariff price, will be costing you a lot more than the small extra saving you might make on your tariff rate if you delay your switch till its hot and the days are long.

What if you'd followed my advice in autumn?

If you just want to switch providers once a year, my data shows that around late autumn/early winter is the best time to compare tariffs. (If you didn't switch then last year, it's best to switch now and not wait till autumn 2010, as I'll demonstrate in the next section.)

Last autumn I recommended switching, but let's say that you ignored my advice and have been waiting for the very small cuts that have occurred over these past winter months to come to a halt, so you can get the cheapest tariff when it ends. By waiting - by trying to save those few extra pennies - it has cost my average Farnborough user £45 in just a few months.* (I always use Farnborough in my articles for consistency, but my other tests show similar results.) If you've never switched before, or if you switch less than once a year, the savings are pushed up to around £75.

What if you'd followed my advice a year ago?

This time last year I recommended that, if you didn't already switch providers at the start of winter (the best time to switch), you were better off switching immediately rather than waiting till the big six had made cuts to their standard tariffs.

If you'd followed my advice, you would in just two months have become £30 or more better off compared with someone who waited till the big six had made their cuts, and you'd still be that much better off today. (If you'd switched again in autumn it would have been even bigger.)

Getting into alignment with the seasons

At some stage, it would be a good idea to align your switching with the cycle of cold weather and shorter days, but for now you can save yourself some money immediately.

OFGEM says that the vast majority of people who switch do so only every 12 months+ but, if you choose to switch now and also to switch in the onset of winter (it's free after all), ensure that you look for the cheapest tariff that has either no exit penalties, or very short ones.

To check this out, when you do an energy comparison through our tool and get to the results page, you can click on 'more details' to see what exit penalties there are and how long they apply for. Please also read my piece Avoid these massive hidden energy charges to ensure you aren't caught out by a few special kinds of costly exit boobytrap.

What if I'm wrong?

The data I've been collecting over the past few years is pretty good, but I can't make promises. However, unless a supplier breaks the mould by substantially under-cutting the cheapest tariff, it still makes sense not to wait for the colder months to go by before getting a better deal. By waiting, you're playing into the energy suppliers' hands. Don't make the same mistake as last year!

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*I've assumed here that before the switch the user was paying £100 more, which means that this person probably is a regular switcher, switching roughly once every 12 months. The savings for someone who has never switched or who is on an expensive tariff would be even greater for someone who had followed my advice. It's also based on increased energy usage data for winter. Furthermore, I'm assuming the energy supply took four weeks to switch over.