12-Month Energy Contracts And Free Gas!

Should we be worried by the introduction of the first long-term energy contract?

Just over a month ago, in Awful News For Energy Customers, we highlighted the fact that Ofgem, the energy regulator, had decided to remove the restriction that we can switch energy contracts at 28 days' notice.

Ofgem did this so that companies had more incentive to provide us with energy-saving measures such as smart meters. These will instantly show you how much energy you are using across the home and hopefully result in people cutting back on their usage. Their introduction is a little way off though, as a two-year trial in 15,000 homes was only confirmed in July.

First contract

It took a little while but the first gas and electricity contract under this new regime appears to have been launched. It has come from a small supplier called Utilita.

Although the contract is for a year you are able to get out early without any penalties, as its customer service representative was very clear in telling me, although leaving early does mean that you'll just lose out on the annual discount that you would have received at the end of the term. This sort of feature is nothing new really. Our household gets an annual rebate of £80 through npower, for example.

As it happens, Utilita is one of the cheapest suppliers at the moment (although it depends on where you live and your usage), coming fourth when I checked our own household usage earlier today. So this new long-term contract doesn't look like anything we need to be wary of. But we'll need to see how this trend develops.

Free gas for a year

British Gas has recently launched an offer that runs until 27 October. Some commentators have highlighted this as another long-term contract but it appears to be something slightly different. British Gas will refund your gas usage for a year (up to a maximum of £800) if you buy a new boiler from them. You'll still get a rebate (just over £300) even if you switch away within a year.

This deal is worth looking at if you're in the market for a new boiler, although you may be able to get a cheaper boiler installation elsewhere.

Switching's still popular

Recent figures from Ofgem indicate that we've been switching around 700,000 accounts each month this year even though energy prices have fallen.

Our gas and electricity comparison service can quickly help you find the cheapest deal. If possible, try to use annual consumption figures rather than bill amounts as this is a more accurate way of finding the right offer for the amount of energy you use. The average household uses 3,300 kWh of electricity and 20,500 kWh of gas if you want a reference point. Due to the complex pricing structures the companies use, the same supplier is not always the cheapest for all levels of usage.

Online deals are the cheapest type of accounts available, but less than one in ten households have them. Opting for monthly direct debit can save you additional money although suppliers sometimes revise the monthly payment for no good reason so watch out for this.

Dual fuel usually works out cheaper, but at the moment splitting up your gas and electricity suppliers can sometimes save you more money, so it's worth checking to see if this is the case.

> Compare gas and electricity deals here at the Fool.