British Gas back in the firing line as customers move on

David Prosser looks at five diverse households with different energy needs to compare suppliers' dual fuel costs

Tim Wolfenden, of price comparison service uSwitch, says British Gas customers have been flooding to it during the past few days, looking for a cheaper supplier before the price rises - 14.2 per cent for gas and electricity - take effect on Monday. "Hits on our site have quadrupled in the past week," he says.

But should British Gas customers be so quick to desert the former state-owned monopoly? The company says it is simply passing on to customers the increasing cost of energy in the wholesale gas and electricity markets - and that even after the price rises, its profits will fall sharply during the second half of the year.

Moreover, British Gas is not alone in rising prices. All the large energy suppliers have increased charges in recent months. At British Gas, this is the second time in the past 18 months that prices have gone up. But suppliers such as Powergen and EDF have raised charges three times.

However, analysts insist that while all energy providers are significantly more expensive than two years ago, British Gas is more often than not the priciest of all.

"One issue is that people who have never moved away from British Gas are more likely to be paying their bills each quarter, which is more expensive than paying with monthly direct debits," says Alistair Neale, of price comparison service Simply Switch. "But even leaving that aside, British Gas appears to be more expensive than its rivals."

To test the market, Save & Spend asked Simply Switch to look at five different households around the country - a pensioner couple living in Manchester, a family of five from Cardiff, a young couple with a three-bedroom home in Halifax, a London-based couple living in a flat and a single woman from Exeter.

Despite the hugely different energy needs of these households, British Gas was the most expensive dual fuel - gas and electricity - supplier in each case. The average saving available by moving from British Gas's cheapest deal to the cheapest supplier - which varied according to the case study - was around 10 per cent.

Anne Morton, of British Gas, says the comparison is unfair. "As the original monopoly company in the gas market, we are a bit more expensive, because the regulators stop us undercutting rivals," she says. "But we are cheaper for electricity than the former monopoly companies."

However, Wolfenden says that this is no longer the case. On Monday, British Gas will raise prices for gas and electricity by the same amount - most of its rivals have made smaller increases to their electricity bills.

"Certainly, for gas, British Gas is the most expensive of the large suppliers in the UK," he says. "And while it used to be true that it was more competitive on electricity, that's not the case after this price rise."

Morton also points out that other energy suppliers may yet announce further price rises this autumn, which would make British Gas look less pricey.

But Joe Malinowski, of The Energy Shop, says: "The British Gas increase affects 11 million customers and is much higher than we were forecasting on the electricity side - most customers will be able to switch to cheaper deals."

Should you fix your energy prices?

* Around 4,000 British Gas customers have signed up for the company's new fixed-price deal this week. They won't avoid Monday's price increases, but after that, the company guarantees they'll get the same deal for the next four years.

* At first sight, the offer looks attractive. But uSwitch's Tim Wolfenden urges customers to be wary. "We prefer capped deals, where prices can come down in future but not rise," he says. "Also, British Gas's deal comes with redemption penalties of up to £70 if you want to get out of it for some reason."

* Industry experts think the price of wholesale gas could fall in 2007, as new supplies come on tap. But customers locked in to British Gas's fixed deal - or a similar offer from EDF - could miss out on the savings. A capped deal from Scottish Power or Powergen might, therefore, make more sense, even if it is more expensive now. British Gas also has a capped deal.

* This is a gamble. It's impossible to be sure that prices will fall in two years' time, particularly as events such as Hurricane Katrina, which can affect prices, are so difficult to predict. Fixing could turn out to save you money.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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