Research and analysis

Many households could save around £200 per year through switching energy supplier: Basis for claim

Updated 12 February 2016

1. Basis for claim

Based on Ofgem’s “typical domestic consumption” household annual usage (3,100 kWh electricity and 12,500 kWh for gas)^{[footnote 1]}, we estimate that of the total 18m UK households who use gas and do not have a pre-payment meter, well over half of these (14 m households – all with both gas and electricity supply) could save over £200 a year or more by switching to the best deal on the market, based on saving over £50 on electricity and £150 on gas. The best deal, averaged across GB households is £765 (electricity £406 and gas £359) paying by direct debit.

Of these people we estimate that 9.5 million can save over £300 (savings of £85 for electricity and £215 for gas). Of these 9.5 million, nearly 5 million pay by standard credit, so would need to move to direct debit to achieve the estimated savings.

2. Sources

1. Energy usage: We have data from NEED (National Energy Efficiency Data-framework) that shows energy consumption of gas and electricity by household, allowing us to observe the distribution of energy consumption by household and thus calculate median household energy consumption. The NEED data set is a data framework where the detailed meter readings of all properties in GB are matched with data from the valuation office and other sources to provide insights into energy efficiency and other issues. Background data and the [methodology] (https://www.gov.uk/government/publications/domestic-national-energy-efficiency-data-framework-need-methodology) are available.
2. Tariffs: We have data from DECC’s Domestic Fuel Inquiry (DFI) that shows the number of customers by tariff type and details of the tariffs. The survey is run quarterly, with energy bills estimated annually. The survey, responded to by energy retailers, achieves coverage of around 90% of UK households. We thus have detailed information on which tariffs from which supplier are most popular, thus enabling energy bills to be estimated. Data relating to the distribution of tariffs at the end of September 2015 has been used. Full methodological details.
3. Best available deals. These are based on Price Comparison website results for a property with median consumption. We found the best available deal on 25 January 2016 for a property with median consumption in each of 14 regions and calculated a weighted average of results to produce a national best available deal of £765 for gas and electricity; (details are in Annex 1). We used the UK Power website but are confident results are typical: we had previously conducted a comparison of three switching sites –UK Power; Uswitch; gocompare. All sites found exactly the same tariff available at the same price.
4. All DECC data sources quoted in this document are National Statistics and produced in accordance with the UKSA (United Kingdom Statistics Authority) Code of Practice.

3. Median energy consumption

1. From DECC energy statistics and NEED^{[footnote 2]} – Ofgem provide advice to switching sites on levels of consumption to be used in comparing energy bills. The results of their latest study in 2015 (see earlier footnote) included the following comment “suppliers and their representatives will be required to use the new medium consumption values from 1 September 2015 …, and … we would like other stakeholders who use the TDCVs (typical domestic consumption values) to also move to updated values from 1 September. These TDCVs (typical domestic consumption values) have been used in this analysis.
2. The new lower median values – 3,100 kWh / year for electricity and 12,500 kWh for gas - are now used by most participants in the energy market. Those who don’t use these median values tend to use the higher mean consumption levels of 3,800 kWh / year for electricity and 15,000 kWh for gas, which will produce larger bills (and larger savings when compared to best current market offerings). DECC analysis suggests that these higher values, on a temperature adjusted basis, still remain valid, see table 3.07 of Energy Consumption in the UK^{[footnote 3]}.

4. Estimated bills and potential savings

1. We took the DFI database, from 2015 quarter 3, and excluded pre-payment customers and those who use Economy 7 for electricity. Estimated energy bills for the remaining 18m households were calculated assuming median energy consumption and compared with the best available regional tariff. The data was sorted by levels of saving possible. It was estimated that over 14 million households could achieve savings in excess of £200.
2. DECC estimate that 9.5 million of these 14 million households can actually save over £300. Of these, nearly 5 million currently pay on receipt of their bill, so would need to move to direct debit to achieve the estimated savings.

5. Annex 1: Best available deals by region

Data collected – 25 January 2016 using average median consumption for dual fuel consumption of 3,100kWh of electricity and 12,500kWh of gas from comparison site. Below deals all require direct debit payments.

Region	Company	Tariff	Elec Bill	Gas Bill	Total Bill	Weighting
West Midlands	extra energy	Fresh fixed price Feb 2017 v4	£405	£354	£759	1.9
North East	extra energy	Fresh fixed price Feb 2017 v4	£414	£355	£769	1.3
Yorkshire	extra energy	Fresh fixed price Feb 2017 v4	£397	£347	£744	1.8
North West	extra energy	Fresh fixed price Feb 2017 v4	£405	£366	£771	1.8
Eastern	extra energy	Fresh fixed price Feb 2017 v4	£390	£380	£770	2.5
Merseyside & N Wales	extra energy	Fresh fixed price Feb 2017 v4	£429	£375	£805	1.2
East Midlands	extra energy	Fresh fixed price Feb 2017 v4	£396	£350	£747	1.9
South East	extra energy	Fresh fixed price Feb 2017 v4	£407	£381	£788	1.6
South West	extra energy	Fresh fixed price Feb 2017 v4	£434	£379	£813	1.1
London	extra energy	Fresh fixed price Feb 2017 v4	£376	£390	£766	1.7
South Scotland	extra energy	Clear fixed price Feb 2017 v3	£416	£305	£721	1.6
Southern	extra energy	Fresh fixed price Feb 2017 v4	£404	£353	£758	2.2
South Wales	extra energy	Fresh fixed price Feb 2017 v4	£425	£345	£771	0.9
North Scotland	extra energy	Fresh fixed price Feb 2017 v4	£444	£314	£758	0.5
Great Britain			£406	£359	£765	22

Best deals as at 10 February are around £20 lower, as 8 companies have bettered the above tariffs in the two weeks following the initial research. However, a number of companies have announced cuts to their standard variable gas tariffs averaging around £32. These two changes broadly offset each other, and thus do not negate the above claims.

6. Annex 2: Distribution of UK consumption

From the NEED data set we identified the 75% percentile from this data – that is the consumption level of the lowest 25% of the UK population. In 2013, these consumption levels were 2,137kWh of electricity and 8,897 for gas. This consumption in 2015 would equate to an average bill of £825 = (2,137 x 0.1386 + 69.0 + 8897 x .0418 + 87.75) [the average consumption x average price + standing charge for each fuel]. Putting these consumption levels into a switching site suggests a cheapest bill of £570 – thus a saving of £255.

1. https://www.ofgem.gov.uk/sites/default/files/docs/2015/05/tdcvs_2015_decision_1.pdf ↩

2. https://www.gov.uk/government/collections/national-energy-efficiency-data-need-framework ↩

3. https://www.gov.uk/government/collections/energy-consumption-in-the-uk ↩