Is It Worth Freezing Gas And Electricity Prices?

[Battenberg]

I've had an offer from British gas to freeze my gas and electric charges until 2009.

Inlight of the huge increase lately it seems like a good idea but I was wondering if anyone could tell me if prices are ever likely to go down and if it seems foolish to get locked in with British Gas?

It doesn't look like it's going to benefit me to move companies as they are all putting their prices up.

Opinions please.

[RobertPaulson]

I've had an offer from British gas to freeze my gas and electric charges until 2009.

Inlight of the huge increase lately it seems like a good idea but I was wondering if anyone could tell me if prices are ever likely to go down and if it seems foolish to get locked in with British Gas?

It doesn't look like it's going to benefit me to move companies as they are all putting their prices up.

Opinions please.

in short, yes, but not with british gas.

Go to uswitch.com and find the cheapest supplier for your area with a fixed rate deal. IMHO it is worth paying up slightly to get a longer term deal.

My reasons

Well, most suppliers are now offering these deals to 1) attempt to deflect negative press from price rises (as an anecdotal I had my boiler serviced the same day the price rises were announced and asked the boiler 'engineer' if he was getting flak over it, que a rather pre-practised line saying he hadn't noticed due to fixing his price last year - a very cute pr strategy). And (not surprisingly) 2) Most suppliers think prices are actually going to fall for next winter.

The main driver of the price increases has been gas - the north sea is running out and somewhat faster than expected, with erratic field reliability and the UK is becoming much more import dependent with a limited infrastructure and not much indigenous storage facilities. Gas is also used to generate power (and so the cost increases feed through to this, adding to the issue of the aging fleet of UK power stations and the rising cost of environmental constraints) and is indexed to oil (hence the rises in that have also fed through to gas and thus power. A fairly significant amount of new import infrastructure is due to come online for next winter, which should (all other things being equal) reduce the cost of gas on peak demand days in the winter significantly. Having said that I wouldn't read too much into point 2 in the last para as most suppliers will hedge new fixed price customers on the forward markets and so probably won't benefit too much from any fall in prices.

Why do I think you should fix? Well 1) For most suppliers outside of british gas you can walk away from the deal if it becomes out of the money without paying any fixed charge, and 2) I think prices are likely to rise significantly - geopolitical issues impacting the oil market are currently very bullish and would not take much to kick off a large jump in prices (nigeria, iran, venezuela, the approach of peak oil and the reduction of swing capacity in saudia arabia to name but a few), additionally russia is swiftly realising that it is holding all the keys to start a near equivalent of the gas version of OPEC and can reasonably be expected to flex its muscles over the next few years (whilst we still take a large part of our gas from the north sea and also norway, increased import capacity will soon be used as export capacity if prices spike on the continent.

The comfort of knowing your basic needs in terms of heating and cooking are fixed if oil prices go through the roof is well worth paying a few quid over a floating deal for IMHO (and if you've never changed supplier, you'll probably get this for the same price you were paying the incumbent anyway). If the wonderful geopolitical machinations presently driving the oil price disappear over the next year or two and gas prices plummet due to new discoveries in the north sea then you can still walk away from the deal, but I wouldn't hold my breath...

[RobertPaulson]

The comfort of knowing your basic needs in terms of heating and cooking are fixed if oil prices go through the roof is well worth paying a few quid over a floating deal for IMHO.

Like I said, get a fixed price deal!

Gas shortage sends prices soaring

[Battenberg]

Thankyou for your comprehensive reply.

I am having a look around now for the best deal. Having looked at a few other websites I see British Gas getting a bit of a slating so perhaps now is the right time to part company.