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Last Updated: Tuesday, 24 October 2006, 23:13 GMT 00:13 UK
Is it worth switching energy suppliers?
By Julian Knight
Personal finance reporter, BBC News

Gas ring
Consumers have been stung by the rising cost of energy
There is nothing like being hit hard in the wallet to focus the minds of consumers.

The past 18 months has seen a blizzard of energy price rises, prompted by geo-political and supply factors - all of them bad from a consumers' point of view.

The upshot has been consumers are shopping around for their electric and gas as never before.

The number of consumers switching supplier is startling.

According to the industry regulator Ofgem, roughly half of the UK's 20 million gas customers have now switched from their original supplier since they were first allowed to do so in 1998.

A similar story of supplier-hopping has occurred when it comes to electricity.

Continental comparison

Britons are far more likely to up-sticks than their continental counterparts. Fewer than one in 10 German and one in seven French consumers have moved supplier since 1998.

On average UK consumers can save on average 100 the first time they switch supplier
Chris Locke, Ofgem

"The UK market is the most open to competition in Europe," says Chris Locke, Ofgem spokesman.

"On average UK consumers can save on average 100 the first time they switch supplier.

"Subsequent switching produces a lower level of savings but money can still be cut from bills."

The recent price rises have given an extra impetus to switching. In April, when a host of price increases started to bite, a record 900,000 customers changed supplier.

Customers are switching themselves using online utility price comparison sites such as uSwitch or Simply Switch.

In theory, it is relatively easy to switch energy supplier. Certainly it is a less arduous process in principle than moving a current account or mortgage provider.

"You simply pick up the phone to the supplier you want to move to, let them know your personal details, bank account number and your meter reference number," says Geoffrey Slaughter, head of product development at uSwitch.

Electricity meter
Do not forget to give a meter reading when switching supplier

"It is also a good idea to let your new supplier know your usage; just in case you want to pay by direct debit, you do not want to pay more each month than you actually use," he adds.

After this initial call the new supplier contacts the customer's existing supplier and the transfer of account is under way.

The transfer takes a month and all the customer has to do is give their old supplier a meter reading so that a final bill can be generated.

Fixed-price deals

The UK's six main energy suppliers are scrapping for your business.

Against a backdrop of rising prices, providers have been working overtime to give themselves what in marketing speak is called a "unique selling point" - in other words, something to stand out from the crowd of companies.

The advice is keep an eye on your bills and if you are paying too much let your provider know you want to terminate the protected price agreement
Geoffrey Slaughter, uSwitch
"Protected" price deals have been key to this. There are three types of protected price deals.

"Firstly there is the standard fixed-price deal. As the name suggests this fixes prices for a set period, say (until) 2010. The downside is if prices fall, the customer's bills do not," says Mr Slaughter.

"The second type of deal is capped. Under this type of arrangement, the supplier pledges not to raise prices above a certain level, but if prices fall the customer will see their bills drop.

"The third from British Gas is called fix and fall. Prices are fixed for a specific period of time."

After this specified period of time, end of 2007, prices are guaranteed to fall.

But there is a note of caution to be struck with protected price deals.

Wholesale gas prices have been falling for months, as fresh supply comes online, and this is set to feed through to customer bills in 2007.

Therefore some of those who opted for a standard fixed-price deal may in the not-to-distant future find that they are paying too much. However no providers currently impose a penalty for moving away from a protected price deal.

"The advice is keep an eye on your bills and if you are paying too much let your provider know you want to terminate the protected price agreement," says Mr Slaughter.

Pre-payment let down

Not everyone is taking part in the switching jamboree.

HOW TO SWITCH SUPPLIER
Contact your prospective new supplier and tell them you want to move
Give your new supplier an idea of how much energy you use each month or quarter
Under an industry protocol it should generally take about a month for your account to be switched
On the day of the switch call the supplier you are moving from and give them a meter reading so that they can produce a final bill

Customers who use pre-payment meters - about 12% of gas and 14% of electricity users - are much less likely to have switched than customers who pay by direct debit or monthly bills.

The most recent Ofgem study reveals that just over a third of pre-payment gas users and four out of 10 electricity customers have switched supplier.

This compares with more than half of direct debit and monthly bill payers who have switched.

But according to consumer groups pre-payment customers are the most in need of finding a cheaper energy deal.

On average, pre-payment customers pay 45 more a year than quarterly bill payers or close to 100 more than those paying by direct debit.

"These people are often on low fixed incomes, they could really benefit from moving to a less expensive supplier," says Graham Kerr, spokesman at consumer watchdog Energywatch.

But he added: "Any special deals such as fix pricing are aimed at direct debit and quarterly bill-paying customers.

"The market doesn't work for pre-payment customers. It's almost as if the companies do not want them... after all, it is more expensive to have the meters in place, managing the card or token system."

In any other walk of life if you pay in advance you get a discount but not for pre-payment energy customers they have to pay more, it is crazy
Graham Kerr, Energywatch

But energy providers deny that pre-payment customers are being left behind.

"These are considerable switching rates by most standards, especially when you compare it with the EU - it's only 2% in countries like Germany," said a spokeswoman for the Energy Retail Association.

"Energy suppliers are heavily investing in new pay-as-you-go (pre-payment) metering technology and they compete for these customers aggressively."

However, online energy switching services like uSwitch only offer to switch customers paying by direct debit or quarterly bill.

USwitch told the BBC that it had proved "difficult to push this through with suppliers... we hope in future that pre-payment customers will be able to switch through us".

Energywatch accuses the industry of missing a trick.

"In any other walk of life if you pay in advance you get a discount but not for pre-payment energy customers. They have to pay more, it is crazy," said Mr Kerr.

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