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You've got the power

Martin Lewis of moneysavingexpert.com
10/ 6/2008

GAS and electricity prices could rise between 15 and 45 per cent by the end of this year if industry estimates are to be believed.

That means the increase on a typical household bill could easily be as much as £300. This is on top of the 60 per cent rise we've already had over the last three years.

The international price of oil and wholesale gas has shot up and the energy companies - even though many of them make record profits - are determined to pass this cost on to us.

It's very likely we'll see the first tranche of price rises hitting late summer or early autumn. In fact, British gas has already signalled it's likely to put prices up by that extent then.

Predictions are that there will be another rise in November, December or early January.

So what do you do?

BUYING gas and electricity has now become a bit like getting a mortgage; you have a choice between a fixed, or a variable tariff.

There is a raft of fixed rates out there, also known as capped tariffs, which you can sign up for right now.

Once you get them, the price you pay per unit is guaranteed to stay the same for two to three years.

The problem is that the cheapest capped tariffs are typically around 10 per cent more expensive than the cheapest uncapped tariffs, meaning switch to one and there's a chance you'll pay a little bit more in the short term until the prices are hiked.

Yet go for a fixed rate now, and if prices rise as predicted, you'll have made a very good deal.

Of course, while the rises are likely, they are not guaranteed. And if they don't happen, you could find yourself paying slightly more than you need to.

Then again, very few people are on the cheapest deal anyway, so if you haven't switched for a number of years, then compared to what you're paying right now, you can probably still save by going to the cheapest capped tariffs.

Is capping right for you?

SO who should fix? The absolute no brainer answer is, anyone who can't afford gas and electricity price rises. For them, surety is more important than the small risk that this might not be a good deal. Therefore, it's worth grabbing a capped rate right now so there's no chance your costs could rise.

For those who can afford a rise in gas and electricity prices, my personal bet is still that a capped tariff is the right thing to do. But there are no guarantees here.

Either way, if you are going to fix, you have to act quickly. We've already seen a number of the cheaper capped rates disappearing over the last few weeks with providers who are anticipating future rises unwilling to lock themselves in at such a low rate.

Plus it takes two to three months for the switch to be completed and for the new capped tariff to kick in, and by then the price rises may have already hit.

So if you're going to do this we're talking today, tomorrow or over the next few days if you want to get a good deal.

How do you switch to a capped rate?

YOUR existing provider may offer a capped rate as an alternative to the one you are on. But far better is to do a cross-market comparison using one of the independent comparison services such as energyhelpline.com, TheEnergyShop, uSwitch or Energylinx.

You can call these up and someone will take you through the process. Better still, you can do it on the internet as this gives the added possibility of getting cash back on top of the savings.

However, that bonus isn't available if you go direct to these sites. It's only available if you go through my website - moneysavingexpert.com/gaselec. This is a result of a price war between comparison sites trying to get MoneySavers' custom.

For people who are slightly concerned about switching and what it actually means, don't worry too much.

You'll receive the same gas, the same electricity, the same pipes and the same safety assurances. All that changes is who provides the customer service and the billing and the rate.

If you need surety, I'll say it again. It's worth considering a capped tariff right now and in the comparison services you'll find they give you the option to look only at the cheapest caps.

TV money guru Martin Lewis runs the consumer revenge website MoneySavingExpert.com; ensure you get his weekly e-mail so you're constantly saving money. You can watch Martin on It Pays To Watch on five at 7.30pm Wednesdays