It's gas mark 9 as energy bills rise to boiling point

Some blame greedy utilities, others Russia, but consumers can contain surging prices

The struggle to keep a lid on rises in your gas bill is reaching boiling point.

On New Year's Day, the price hikes announced by npower and Scottish & Southern Energy (SSE) at the end of last year started kicking in for some 11 million households.

Npower and SSE have turned up the gas thermostat by 13.7 and 13.6 per cent respectively, and both have raised their electricity charges by up to 12 per cent.

These increases will add up to £100 a year to the average customer's fuel bill, according to the price-comparison service Money- supermarket.com.

Meanwhile, Energywatch, the consumer watchdog for the gas and electricity industry, has raised fresh concerns that vulnerable customers - particularly the elderly and those on low incomes - will switch off their heating to save money.

Worse, the gas price rises are unlikely to be the last: neither provider can rule out further hikes in the coming months.

It's the same story at British Gas, Powergen, EDF and Scottish Power, all of which stressed last week that they could be affected by further price rises in wholesale gas. This is the cost of buying their own supply and is likely to be passed on to customers.

Already, all four have introduced gas bill increases of between 10 and 14.2 per cent since August.

Jitters also spread last week over another round of gas hikes for consumers when Russia cut off supplies to Ukraine.

This led to severe supply disruption in Western Europe and, although anxiety about the impact on Britain eased on Wednesday as officials calmed the dispute, the episode underlined how much influence outside events can have on our bills.

With supplies in the North Sea beginning to dwindle, Britain has become a net importer of gas. That leaves us exposed to the risk of supply disruptions such as those that hit the pipelines crossing the Ukraine last week.

When competition for scarce supplies forces up wholesale prices, the consumer pays. And wholesale gas prices doubled in the 12 months to August alone. This explains why customer bills have risen, on average, by nearly a third over the past two years, companies claim.

"There is only so much we can absorb, and a long period of high prices will have to be reflected in household bills," warns an EDF spokesman.

This view is reflected at British Gas. No decision has yet been made to raise charges in 2006, insists a spokeswoman, but last month's trading outlook from Centrica (British Gas's parent company) warned that "consumers will face another year of price increases as all suppliers look to recover higher wholesale costs".

Allan Asher, the chief executive of Energywatch, warns that 2006 will be a "grim year" for customers. The companies making "billions of pounds of extra profits from these price rises" should start new plans to help vulnerable customers, he says.

While the price hikes may sound like doom and gloom, there are plenty of steps you can take to cut costs. Greater competition for gas and electricity has sprung up since deregulation in the 1990s, and one of the easiest ways of mitigating price rises is to switch supplier.

By doing so, you could save up to £200 on your gas and electricity bills, claims the price-comparison service SimplySwitch.com.

Fed up with high fuel charges, Daniel Atzeni and his girlfriend, Dawn Kendall, of Northolt in Middlesex, switched suppliers for the first time last November.

The couple acted when they received their September gas bill from British Gas. "There was a massive difference in the total from the previous month," says Daniel, 28.

"We [moved] from British Gas and from electricity supplier SSE to a "dual fuel" tariff with Powergen. It's given us a £150 annual saving on our bills."

Although circumstances will differ for every household - you won't always reduce bills by taking both gas and electricity from the same supplier - you can usually make some savings by paying by direct debit (monthly or annually) and being prepared to manage your account online.

SSE, for example, knocks 6 per cent off your bill for gas and electricity if you use direct debit, while British Gas offers a £5 discount for each form of energy to customers who opt for paperless billing.

Another option is a preset "capped" tariff. While this will cost you more than on a standard contract, you will have peace of mind.

For example, if your power supplier is charging you 20p per unit at the moment, it might offer a cap of 25p fixed for a number of months or years. If the price per unit rises above this, you won't have to pay any more.

Watch out, though: with several providers - including EDF, British Gas and Scottish Power - that fixed rate won't go down either.

However, at Powergen, there may be price falls on gas and electricity deals if wholesale prices drop.

With capped deals, check for exit penalties if you switch before the agreement expires: British Gas levies a fine of up to £45.

Some providers offer help for older, vulnerable people. Powergen's StayWarm scheme is open to those aged 60 and over and offers a fixed price for 12 months from signing up.

And greater energy efficiency is another way to warm your home for less.

"Simple measures such as switching to energy-efficient lightbulbs, insulating lofts and walls, and installing efficient heating systems can shave as much as £250 a year off your energy bills," says Philip Sellwood, the chief executive of the Energy Saving Trust (EST).

Financial grants are available for measures like these. For more information, contact 0845 727 7200 or www.est.org.uk.

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