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Last Updated: Tuesday, 29 June, 2004, 23:04 GMT 00:04 UK
How to beat rising household bills
MONEY TALK
By Andrew Salmon
Managing director of uSwitch.com

Andrew Salmon

UK consumers are set to feel the squeeze as a host of utility price rises kick-in. A utility-industry expert outlines the causes of the price increases and how best consumers can counter them.

Over the last decade, customers have benefited from falling prices, when inflation is factored in, for some goods.

However, more recently we have seen a spate of significant price rises, which look set to continue.

A reversal in the price trends of many core household utilities such as gas, electricity, water rates and council tax, will take a bite out of our spare cash.

The cost of essential items is set to grow by 2.8% over the next year, compared to an average growth of just 2% a year since 1995.

Gas and Electricity

Energy bills have increased significantly this year and look like continuing to do so for the foreseeable future.

Customers have seen a wave of gas and electricity increases averaging 6% in 2004, and Powergen has already announced that it will increase gas prices by a further 3.1%.

It is likely that the other major energy companies will soon follow powergen's lead.

Suppliers say, with some justification, they have no choice but to raise charges due to increased pressure on wholesale prices.

Money saving tips
Pay by direct debit - nearly all suppliers offer cost savings for customers who pay by direct debit
Claim what is yours - If you are a single person you are entitled to a 25% reduction on your council tax bill
Switch to a meter - If you're single and don't use much water you could potentially save money by switching
Get on the tarriff - Usage of certain products such as a home phone can change over time without you realising
Source: uSwitch

The cost of wholesale gas has risen 28% since November 2003, while wholesale electricity has jumped 20%.

Water

Water and sewerage companies are claiming that meeting new EU directives will require almost 22bn in capital investment over the next five years.

Recent lack of investment means that this spending is required to meet future demand, repair and replace ageing pipes and improve water quality and environmental safeguards.

As a result, customers should brace themselves for predicted rises of an average 14 per year for the next five to 10 years.

However, the industry regulator, Ofwat, is yet to approve the price increases.

Council Tax and Insurance

The cost of having to fund public sector pay and pensions led to a sharp increase in council tax during 2003.

In 2004 the rate of council tax increase has been lower, no doubt due to pressure exerted on councils by central government, yet average bills have been rising at 6%, more than twice the level of inflation.

As a result, the average household faces paying 800 a year on council tax.

With recent shocks to insurance markets, including severe flooding and terrorist attacks, premiums have rocketed.

Structural insurance saw a rise of 8% over the past year, and vehicle, household contents and structural insurance premiums are all likely to continue to rise over the next 12 months.

Telephone

The home telephone market is the only sector where prices have been falling.

BT's new pricing structure has effectively led to a telecoms price war which can only be good news for consumers looking to save money.

We have seen a spate of unprecedented price cuts by alternative suppliers.

For no monthly charge consumers can choose between attractive offerings such as free weekend calling (One.Tel, Sky Talk, British Gas) or free calls to customers on the same network (TalkTalk, Equitalk, Telco).

Neverthless, BT still retains 70% of the residential phone market.

Whichever supplier you are with, there are a number of things you can do to keep costs down.

Make sure you optimise any discount schemes such as BT's Friends and Family or TalkTalk's Calling Circle.

These can save you an extra 10% on numbers that you nominate. Many tariffs also offer a certain amount of free minutes - ensure you make use of these.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.


SEE ALSO:
How to buy home insurance
27 Apr 04 |  Business
Water watchdog's price rise fury
07 Jun 04 |  Business


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