Personal projections come with a caution. We’re here to cut to the core of what they’re all about.
First things first. If you enter a fixed-rate energy contract, the unit price of energy is set throughout the entirety of your payment period. Then your contract ends.
If you stick with your current supplier, they’ll then put you on a standard-rate tariff. This is almost always more than the fixed-rate you’ve been on. For this reason, we always recommend you run an energy comparison when your contract is due to expire, to be sure you get the best deal going.
A personal projection is a customised energy price forecast for the following twelve months. It estimates your annual bill, bearing in mind your current energy deal and, critically, assuming that you’ll stick with them when the contract ends.
Personal projections were introduced by Ofgem after a lengthy review called the Retail Market Review. We won’t delve too deep into the detail this juicy document because we all have more exciting things to do…
In sum, the energy market had got pretty clustered, opaque, and non-consumer focused. People were confused and couldn’t make head nor tails of the information they were faced with: it was time for Ofgem to step in.
Ofgem introduced a number of transparency measures so people could better understand both their energy bills and the deals offered on energy comparison websites. Part of this was personal projections.
So, personal projections were brought in with good intentions of helping consumers navigate what was then a complicated market and enable them to make informed decisions about saving money.
The idea was that when people compare energy tariffs, they’ll be armed with information from their current provider on what their annual energy bill is predicted to be. As a result, in theory they’ll then be equipped with some pretty good stats to start their search.
Plus, knowing what trajectory you’re on can be grand for budgeting – more on that later.
Reverting back to our helpful spiel on energy tariffs above, we’re sure you’ve already clocked there’s a caution to be had when it comes to personal projections. Energy forecasts are calculated by assuming you will not switch energy providers at the end of your contract (the audacity – we all know consumers almost always save money by switching!).
So, the figure you see is a combination of fixed-rate and standard-rate calculations, dependent on how much of your contract you have left. Let’s help you follow this with a really, really simplified example…
You’re looking to take out a twelve-month contract. Your fixed-rate tariff is 10p per kwh of energy and you receive an energy price prediction of £1,200 for the year. Your current energy bill comes in at £1,500, so the switch is good: £300 in savings!
Then eight months in to your contract, you get another energy prediction; remember forecasts are always for a twelve-month period. The prediction includes the four months left on your fixed-rate tariff at 10p per kwh, plus eight months on a on your supplier’s standard rate which, in this case, is £15p per kwh. Ultimately, your personal prediction is £1600.
Sticking with your energy provider at the end of your contract means you’ll end up paying more – this is why switching suppliers is always a benefit if you’re looking for cheap energy.
Figures will change depending on how far through your contract you are, increasing towards the end. Which makes sense, but the issue with personal predictions comes when the wrong information is used to show potential savings on comparison websites. Let’s continue with our example.
Eight months in to your contract, you start to compare energy deals for when yours ends. You see a tariff estimating your bill will be £1400 a year – shock! You’ve just had yours predicted to be £1,600. So, you look at switching providers to save money.
But hold up: your energy forecast with your current supplier is still predicted as £1,200 as it’s based on your fixed-rate (when you took out your contract). So here, you’d actually be switching to a more expensive tariff, even though it appears to be cheaper than what your supplier is telling you. Something doesn’t sit right.
This is why the question of how useful personal predictions are has been a source of contention, and there’s been a fair bit of discredit towards them. In sum, savings can be inflated and comparison sites misleading.
In addition, we advise you remember that any predictions you get throughout your contract will be based on the energy consumption data your supplier already has on you. If you get an energy forecast shortly after the summer months, that won’t be representative of annual use (at least not with our winters!).
If you’re in a long-term contract with more than twelve months left – perhaps you fixed your energy rate for three years – then energy forecasts can be useful. Having a number, albeit just an estimation, to work with can help with budgeting: you could invest in smart tech or energy-efficient appliances if you want to try and cut that figure down.