COMMENT
Switch Now For Big Fuel Savings

By Jane Mack (TMFJane)
February 20, 2006

Energywatch, the consumer watchdog, described last Friday as the 'bleakest day yet for consumers' when British Gas announced a 22% increase in energy prices. Uswitch, the energy price comparison website, described it as 'one of the biggest social scandals in recent memory'.

Strong words indeed but understandable as the average British Gas bill for gas and electricity is now expected to top £1,000 a year. The latest increase means British Gas has increased its gas prices by 83% and its electricity prices by 55% over the last five years. Comparison service Uswitch claims that British Gas is now 25% more expensive than other suppliers' standard tariffs, and 37% more expensive than the average cheapest tariff.

So why is this happening? Wholesale gas prices have been soaring in recent years. They're 62% higher than for 2005 and 200% higher than in 2003. Electricity prices are also up sharply and around 40% of Britain's electricity is generated in gas-powered power stations.

There's also been a faster-than-expected decline in output from North Sea fields so more is having to be imported from Europe -- a problem in itself as European gas and electricity suppliers are under investigation by the European Commission for anti-competitive behaviour. The energy regulator, Ofgem, says British customers paid nearly £1 billion more for their gas this winter, mainly because access to European pipelines and storage facilities have been restricted making it harder for companies to buy gas and pipe it back to Britain.

Nevertheless, it's clear that the gains to be made from switching suppliers are now greater than ever before and yet half of all energy consumers have never done so. If you've never switched, then you have the most to gain, especially if you opt for an online only, dual-fuel deal and choose to pay by direct debit.

It's worth noting that British Gas's increase will not affect dual-fuel users who have previously signed up to price capping agreements. Its previous deal offered a price cap until 2010 but its latest offer offers dual-fuel customers price protection until April 2009. It's worth giving this some consideration, as no-one knows where gas prices will go next.

It's not only British Gas that is raising its prices of course. Scottish Power and EDF have recently announced price rises that will take effect from next month, as the tables below show:

GAS PRICE INCREASES	Increase in 2004 & 2005	Increase to date in 2006
British Gas	36%	22%
Powergen	23%	-
EDF	31%	15%
nPower	34%	-
Scottish Power	31%	15%
Scottish & Southern	35%	-

ELECTRICITY PRICE INCREASES	Increase in 2004 & 2005	Increase to date in 2006
British Gas	32%	22%
Powergen	17%	-
EDF	29%	5%
nPower	28%	-
Scottish Power	19%	8%
Scottish & Southern	20%	-

Source: SimplySwitch

The other three main suppliers, nPower, Powergen and Scottish & Southern Energy (who own Southern Electric, Scottish Hydro Electric and SWALEC) may also announce price rises soon, so bear this in mind when comparing deals or alternatively hold off making comparisons until they do announce what their increases will be.

You can compare fuel deals at the Fool (this section of our site is powered by uSwitch). You can also vote in our weekly poll: have you ever switched?