Money: Cheap gas, if you can stand the heat

Switching your supplier could bring huge savings, says Stephen Pritchard

A CHEERY cartoon dog is appearing on poster hoardings announcing cheaper gas prices.

The dog is the public face of Ofgas, which regulates the gas industry. Its appearance is the organisation's response to growing public concern that the welcome prospect of cheaper gas comes at the price of unwelcome high-pressure sales techniques.

Complaints include sales teams, some working on commission alone, demanding money up front from households that want to switch, and misleading information about prices and payment terms. There have also been problems with bills from new suppliers and old accounts not being closed when customers switch from British Gas.

The situation could become more complex still when electricity is also opened up to competition. Confusingly, some of the new gas suppliers are well-established electricity companies, such as Energi (part of Manchester- based electricity company Norweb) and Southern Electric Gas. Other utilities could well enter the electricity sector before competition goes national in that market.

For all the tales of pressure selling, consumer bodies and regulators believe energy competition has benefits, bringing significant savings. Although Ofgas does not compile tables of comparative prices, it says that families that change suppliers can save up to 20 per cent on their gas bills.

Gas and electricity competition works in a way that is transparent to householders. There is no need for new pipes or wires, or even a new meter. The only change is the company name at the top of the bill and on the contract. The gas or electricity is carried to each home or business by the grids. In the case of gas, this is almost always Transco, part of BG plc - the old British Gas - or the regional electricity companies and the National Grid for electricity. Companies supply the grids according to the power their customers take out. Unlike the cable television companies' bid to compete with BT for telephone connections, there is no need to dig up the streets. Switching gas or electricity companies should be as simple as making a phone call and filling in a form.

Competition in gas and electricity is being introduced in phases across the country. For gas, the process started in November last year and will cover the entire country by May. In electricity, the process will begin in September, again on a phased basis.

By next Christmas, consumers will face a bewildering choice of energy suppliers. There are already 21 licensed gas companies, of which 15 have licences covering all or most of Britain. These compete with each other, as well as with British Gas, anywhere where they are licensed.

To make matters more confusing still, companies can charge different tariffs in different parts of the country, and almost all have different charges depending on the amount of gas used and the method of payment. Despite this, Ofgas reports that a significant number of consumers have chosen to move to a new gas company. So far, the regulator estimates that around 3 million households have "registered an interest to switch", even though competition so far has reached less than half of eligible households.

People are being drawn to change mainly because of the promise of savings. But Ofgas cautions that consumers should take everything into account, not just the cost of the gas. "We advise that people should look at other areas, like service," suggests Fran Elliot, Ofgas spokeswoman.

Consumers also need to look at the contract in some detail. Gas and electricity bills include a standing charge, as well as a metered element for gas used, and the way costs are divided between the two elements determines how cheap the gas is for a household. A single person using little gas, for example, will find a contract with a low standing charge better than one with generous volume discounts.

The length of the contract is important. Some gas companies offer fixed contracts for one or two years and there are penalties for terminating them early. A rolling contract, with just a 28-day notice period, is more flexible, but it may be more expensive.

The need to weigh up all the different elements of each gas company's offering means it is vital to obtain all the facts. Some gas sales agents are offering discounts for householders who are willing to sign a contract on the spot, but Ofgas requires all gas suppliers to contact new customers again after 14 days to check that they are still happy. Anyone who is not is entitled to cancel the contract.