Wednesday 6th August 2008
by Bob Bardsley
Know Your Money Editor
They say that only two things in life are certain - death and taxes. But at the moment, many people might think gas price hikes are even more likely than either of those things. Hardly a week seems to go by without another utilities company announcing its latest price increases. With that, though, comes another problem - how to know where to switch to in order to actually save money.
At times when prices are rising relatively slowly, it might be enough to wait for all utilities firms to put their charges up and then compare gas providers to see who has the most competitive rates. When everyone is raising their costs at once and no immediate end is in sight, a different approach might be required if you are to save the most money. In fact, switching supplier might not be the best option after all.
What's going on with prices?
Like most things, gas is going up in price - and, as headline inflation figures suggest, it is doing so relatively quickly. However, a number of different factors may be to blame, depending on whether you believe what the utilities firms are saying. In a recent trading update, British Gas owner Centrica cited wholesale gas prices - that is, the cost it has to meet in order to buy the gas in the first place - as being behind its own price rises. Such reasoning was also behind its warning that gas is to go up by a further 35 per cent before levelling out.
But now the government is getting in on the act too, with chancellor Alistair Darling revealing plans to take a share of any profits the utilities providers make, according to Reuters. The news provider reports that the minister is considering taking a chunk out of the proceeds and redirecting it to some of the UK's poorest families in order to help them to pay their bills. Whether the companies take this into account and re-price everyone else's gas to compensate remains to be seen.
One fact that may come as some comfort, though, is Centrica's revelation that its own profits have dipped over the past year. Despite the higher rates it is charging to customers, it seems the firm really is facing higher costs of its own, leading to a 20 per cent dip in the amount of money it made in the past 12 months.
Should I switch?
Gas and electricity watchdog energywatch has guidance for anyone planning to switch provider which could help them to make the decision. The website includes statistics relating to the number of complaints received about each supplier. Regardless of this, the site suggests that switching companies could result in savings of £270 for those who have never done so.
Choosing the best form of payment might also be advisable - leading to savings of up to £170 if customers on prepaid meters switch to Direct Debit. Even those not on prepayment packages are told they could save £150 by paying through Direct Debit instead of cheques, while moving to an online account for payments might prove even more profitable, according to energywatch.
What else could I do?
The Energy Saving Trust has a few tips which, while they might not work for everyone, could help some people to reduce their outgoings on utilities. Whether they can cut your gas bills, or whether they apply to your electricity costs, depends on what purposes you use each form of energy for. Perhaps most significant is what kind of boiler you have, as that is where there are a number of options to try.
On the boiler itself, the Energy Saving Trust suggests that the water temperature should be at 60 degrees C - that's 140 degrees F - and that, if it is any higher, you could be wasting energy heating water too high. The same principle applies to central heating, where the organisation claims reducing the temperature by one degree C could equate to ten per cent of the energy used or £50 in cash per year. Remember, the silver lining with rising prices is that the amount you save goes up too - a 35 per cent increase could take that £50 saving up to nearly £70 overnight.
Much of the trust's advice relates to electricity - leaving appliances switched off at the wall rather than on standby, switching lights off when leaving a room - but it could all help to save money. Taking everything into account, it might be possible to cut those bills to an affordable level without needing to change providers at all.
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