Fight Back Against British Gas

After hiking up its prices by 15% last month, British Gas has just announced a record £571 million profit. Fight back and switch suppliers.

British Gas customers could be pretty angry today. They were hit by a whopping 15% price rise in January, yet the company announced a big increase in profits today.

Parent company, Centrica (LSE: CNA) revealed that its operating profits had jumped 40% in 2007 while its British Gas division said that profits had soared from £95m in 2006 to £571m last year.

The average British Gas customer will have to find an extra £143 this year, just to pay their bills, so I think there will be a lot of understandable frustration amongst customers.*

On the other hand, British Gas argues that the price rise was inevitable because wholesale gas prices have risen. In other words, it's had to pay more to buy the gas which it then sells to us.

I reckon that if you put some Centrica shareholders in a room with some British Gas customers, sparks would fly! I'm not going to adjudicate on who is 'right', but I can try and help energy consumers get the best deal for them. So should British Gas customers switch to a rival supplier? 

Unfortunately, four out of the other five major energy providers - - Npower, EDF, Scottish Power and Powergen/Eon -- have also put up their prices by similar amounts. Scottish and Southern, the remaining major player, has yet to push up its prices. This should be little consolation, however, as it is expected to do so shortly.

But what about smaller companies? Are they as hungry for profits as the big six energy providers - or do they take a different approach?

The Good Guys

Sadly, when wholesale gas prices are rising, smaller energy providers such as Utilita, Ebico and Good Energy are actually more likely to put up their prices. This is because they do not `hedge forward' as much as the bigger suppliers, who effectively buy wholesale gas in bulk, and so can wait longer before they need to buy again at a higher price.

Conversely, this means when wholesale gas prices are falling, you should consider switching to a smaller provider, as they can respond more quickly to the cheaper prices on offer.

Still, that means smaller companies are keen to differentiate themselves in other areas, such as service. Utilita, for example, makes a determined effort to avoid automated telephone systems and unanswered queries, and promises it will not employ "uninterested" staff.

Others will specialise: for example, Good Energy is the only UK supplier that supplies 100% renewable electricity, obtaining all the electricity it supplies from renewable sources. So if you want a green tariff, it's the cream of the crop.

Similarly, if you'd prefer your energy to come from a provider with a strong ethical standpoint, look no further than Ebico, a not-for-profit company. It promises to provide energy at "a fair rate" for every customer, and is a particularly good choice for pre-payment customers.

These customers, who typically pay for their electricity with coins into a meter, are often those who are struggling most to make ends meet. Yet the majority of energy providers penalise pre-payment customers with higher rates, because they cost the energy company more than customers who pay by direct debit. Ebico offers the same price to all its customers, regardless of how they pay.

Switch `n' Save

OK, so if you want an energy provider that emits a warm fuzzy glow (on a human level, as well as via your boiler), then you know where to go. The satisfaction of being ethical may be worth paying a higher rate for.

On the other hand, it might not. If what you really want is a competitive rate, then you probably will end up having to go for one of the big six energy suppliers. But don't assume they're all the same, or that you can't save any money by switching. Even though the wholesale gas rises are filtering through to almost every customer, you can still save hundreds of pounds by shopping around.

For example, as our switching service shows, the typical Fool reader (using 5,000kw of electricity and 25,000kw of gas a year) on the NPower standard tariff could save around 20% (£270 a year) by switching suppliers - even more if you currently pay by cheque and are willing to move to direct debit.

But what about all the hassle involved? Well, switching is much less hassle than you might think. Especially on The Fool.

All you need is a copy of a recent bill.

That's it.

Using this single sheet of paper, you should be able to answer all the questions on our forms to find the best tariff to suit your needs. You can then sign up with that tariff and set up your monthly direct debit payment. Your new supplier will then contact you and send you a welcome pack. The online process will take you about 10 minutes, and the switching process will take around three weeks.

So, with that single sheet of paper and 10 minutes of your time, you could save yourself £270. So you can fight back against the big boys. Including British Gas.

More: Switch and Save with The Motley Fool Gas And Electricity Comparison Service

*2008 increase based on the difference between current average British Gas dual fuel bill size (£1,055) and the average British Gas bill size on the 1^st January 2008 (£912).