Hot, hot, hot

By Sarah Modlock

20 September 2005

We live in a era where le beau monde is switching. Men and women are switching roles, genders and partners. And at the tamer end of the spectrum, we are positively encouraged to switch our bank accounts, credit cards and mortgages.

Now there is a new financial switch to be had. And it's hot. Red hot. OK, reading your energy bills is not the most fun you can have with your clothes on. But it's the latest way to save money, particularly with Autumn approaching.

It's true to say that since 1996, the liberalised energy markets have helped bring energy prices down and competing firms undercut each other. But i f you are one of the 26 million domestic electricity customers or the 20 million gas customers then your bills will almost certainly be growing in the coming months as providers blame rising oil prices and shrinking domestic gas reserves for their price hikes.

The story behind this is the huge increase in the price of oil, which has gone up by 50% in the last 12 months to over a barrel. This has driven up the price of gas imported from the continent, where the wholesale price of gas is linked to the price of oil. In turn, this has made it much more expensive to generate electricity in the UK's gas-fired power stations. Higher energy prices have also been a big factor behind the recent increase in the UK's inflation rate. Gosh, my old economics teacher would be proud.

The sad fact is that more than two million households across the UK that cannot afford to keep adequately warm at a reasonable cost. As energy prices rise, this number will go up. Britain has the highest number of avoidable deaths due to winter cold in Western Europe. Not something to be proud of.

Just how fast are costs rising? In July 2005, six million customers with Powergen were told to expect bigger bills. The company's domestic electricity charges are going up by 7% and its gas charges are rising by 12%, adding £52 a year to a typical 'dual fuel' bill. Powergen's increases are the fourth for its gas customers since January last year, and the third imposed on its electricity customers.

In August 2005, five million customers of EDF Energy - which trades as London Energy, SWEB and Seeboard - also saw their bills rise for the fourth time since the start of last year, up 10% and 12% for electricity and gas respectively.

In September 2005 , it was the turn of British Gas customers to feel the heat after the company said gas and electricity prices would rise by a huge 14%. Bills will rise from 19 September but the company said it would offer a £60 rebate, in two instalments, to 250,000 low-income customers to help them pay bills over the winter.

Get fired up

British Gas put up its prices twice in 2004, prompting more than 900,000 customers to swap suppliers. Now nearly three million British Gas customers plan to switch to a cheaper supplier and a further 2 million have pledged to switch away from the energy giant if yet another price hike is announced, according to research by independent switching comparison service uSwitch.com. It estimates that the increase in British Gas prices will send the average family dual fuel bill soaring by hundreds of pounds.

'Customers have finally run out of patience with British Gas,' says uSwitch's Alan Tattersall. 'Our research reveals that they are sceptical about British Gas' motives for this round of price hikes, with nearly one in four believing that the main reason prices are rising is to make a profit or pay directors more.' Tattersall concludes: 'Anyone who is thinking of staying with British Gas should think again as they are paying on average £104 more a year for remaining loyal to the organisation.'

According to energywatch Chief Executive Allan Asher, there are no winners. 'Suppliers are paying over the odds for energy but they are passing the full burden on to consumers. The wage rise for the average person comes nowhere near the latest increase,' he says. Energywatch believes the government should ask the industry to adopt new hi-tech 'smart' meters in customers' homes. These give half-hourly readings which will calculate more accurate consumption costs and allow you to keep an eye on your usage. In the meantime, switching could save you money.

'Switching from British Gas will still pay dividends for many consumers, but the biggest gain is for customers who have never switched,' says Allan Asher. 'They could save at least £80 on their annual home energy bill; more if they change the way they pay,' he explains. Ofgem puts this saving closer to £116. The reason is that if you have never moved supplier then you are probably still getting your energy from what was once a monopoly supplier and being charged their highest tariff.

Figures show 174,000 of us are still switching gas or electricity every week. With typical domestic bills for a three-bedroom semi now rising above £700 a year, it is not hard to see why. USwitch.com is urging British Gas customers not to be panicked into fixing their gas and electricity bills with the firm. The fixed product, which is being heavily marketed by British Gas, offers customers the chance to fix their energy bills until 2010, albeit at a premium rate for gas with redemption penalties of up to £75 if people withdraw before the end of the fixed period.

So don't wait for big bills or a cold call from another supplier. Start saving now by logging onto www.uswitch.com. In addition to gas and electricity comparisons they can also help you cut bills for your home phone, broadband and more. With so many opportunities to save money, it looks like their website is going to be busier than the loos at an Arctic Monkeys' gig.