It's not like the good old days of 2003. The Fool takes a look at whether capped-rate gas and electricity is still a deal worth considering.
The word 'deal' is quite interesting. It means a mutually beneficial business transaction or, even better, a sale favourable to the buyer; a bargain. But in the finance industry there are so many providers to choose from, all with lots of different products, and each product they're offering comes as a 'deal'. By definition, most of these can't be bargains.
It's the same with utilities. Specifically right now I'm thinking about capped-price deals. With these, consumers can set the price of their gas and electricity for two to four years. They are currently available from EDF Energy, Powergen, British Gas and Npower. But are they worth it?
When ScottishPower first introduced these deals back in 2003, they asked customers to pay on average 9% more than the cheapest uncapped product on the market. The capped price expires in December this year. If you switched constantly to the best available deal during the period, you would have lost out. Xelector, which runs The Motley Fool's utilities comparison tool, has shown me that someone on ScottishPower's capped rate who uses relatively low amounts of gas and electricity would have saved £19. A 'medium user' would have saved £131, and a high user would have saved a massive £452.
So, in those days, a deal really was a deal. Now though it seems quite different. If you take Powergen's current capped four-year rate it costs a massive 22% more than the cheapest uncapped rate.
Gas shortages and over-priced access to European gas supplies have contributed to huge bill increases in recent years. With luck, we'll have new gas pipelines from Norway and the Netherlands from next year, which should actually reduce prices from 2008. Woohoo! As analysts also predict electricity prices to come down from about the same time, fixing your prices may not be the best way to reduce your bills.
Most providers have increased their prices recently, so you should take a look at how other providers' non-capped rates compare to yours. If you've never switched before, you could easily save hundreds of pounds. Bear in mind that we're still waiting on Powergen and Npower to increase their rates, which will probably happen within three weeks, so make a note in your diary to check prices!
> Get the best deal. No really! Compare utility prices through The Fool.