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How will British Gas help those facing higher energy bills?

British Gas

British Gas has announced a 12.5% increase in its standard tariff electricity prices pushing up energy costs for 3.1 million households. What will British Gas be doing for those affected by the increase?

British Gas announced today that it will raise its electricity prices by 12.5% from 15 September. This move will push energy costs up for many of its 3.1 million customers on its standard tariff.

This increase brings the total cost for a typical household on a standard tariff to £1,120 per year.

Is it any wonder that hard-pressed consumers will be hugely disappointed to see prices rise again? No. These same customers have been waiting for the government and energy industry to tackle costly standard variable tariffs (SVTs) and instead they have seen their bills go up again.

A year of discontent

While this is the first price increase British Gas have announced in almost four years, it makes them the last of the Big Six to announce its price increases. In February both nPower and Scottish Power pushed up prices which we described as a ‘bitter pill’ and ‘shocking’. In March, SSE and E.On caused outrage when they pushed up their prices. EDF followed in April with its disappointing hike in prices. That disappointment in the energy industry grows today.

After two years of investigation into the energy market by the Competition and Markets Authority, Ofgem (seeking to implement remedies to tackle the problems in the market), and the Government (committing to ensure markets work for consumers and to reduce energy bills), nothing substantive has happened to bring down prices.

Time to engage customers

In November last year we asked energy companies to send us their plans for how they will ensure their customers stuck on poor value deals are moved. British Gas responded to this with its intention to contact those on its standard tariff.

Despite all the debate we are still in the same situation and the industry’s response has been inadequate

Given it was just over six months ago since suppliers outlined their plans to engage with customers on SVTs, we’d like to know what progress they have made in reaching out to the millions of people affected by prices rises, and what they are doing to help them all to get onto better deals? As a customer, will this news encourage you to switch or stay with British Gas?

Have you been contacted by your energy supplier about moving from their standard variable tariff?

No (82%, 827 Votes)

Yes (18%, 185 Votes)

Total Voters: 1,012

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However, in today’s announcement, British Gas did refer to engaging SVT customers. The supplier stated that it has submitted proposals to the Ofgem to phase out the standard variable tariff and ‘level the playing field so that all suppliers contribute to the Warm Home Discount”.

We all agree that this market is not working for consumers. The Government needs to urgently look at what it does to help customers that are paying over the odds. The discussion needs to end and we need to see definitive action.

Comments

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A couple of years ago, maybe more, Which? suggested simple unit pricing as a means of engaging with consumers, but that has been forgotten. Another alternative would be to let consumers choose their energy supplier and tariff in their local supermarket, in the same way that they can choose a new mobile phone.

Companies are still allowed to move their customers onto substantially more expensive tariffs if they do not take action. This must be stopped.

When this latest price rise hit the media it was all anti-British Gas and consumers were being swindled because wholesale electricity prices had fallen and the company was gouging its loyal customers who were disinclined to switch. It gradually emerged that this was the first BG price-hike for over three years and that the other big energy companies had raised their electricity prices earlier in the year. None of the reports on this, not even by Which?, offered an illustration of the equivalent Standard Variable tariffs offered by the five other majors or any of the smaller companies [such as The Cooperative Energy as a good comparator]. It also emerged later in the day that much of the increase was due to two factors – a sharp rise in transmission and distribution costs and the pending rise in the government policy obligation payments which affect the big energy companies but are not charged to the smaller ones.

No wonder this is a political football if we cannot be given all the relevant facts . I am not condoning BG’s price rise but I question whether it deserves the scandalising it has received. None of the media coverage that I saw mentioned that, for the majority of households, electricity was not their highest energy bill and that alongside other routine consumer services expenditure it was not especially significant. Any large increase in prices is a serious worry for those affected by it and we all use electricity so it is an easy target for the media.

So let’s have some balance, and let’s use this example to ram home the message that there are alternatives – better tariffs with the same supplier, and better tariffs with other suppliers. Switching is no longer so difficult as it once was and there is ample time for people to get out of British Gas if they want to before this increase applies. Many people might take the view that since gas is their most expensive energy source they might be better off staying on a dual-fuel tariff with BG and their other features than going somewhere else. They should at least look, though – some say we are due for a hard winter.

I agree with John. I’m currently on a fixed rate dual fuel deal with British Gas which was the cheapest on the market when I took it out nine months ago, but this is just coincidence; I’ve used at least five other companies as my supplier. Just before the British Gas fixed rate deal expires I will be looking around for the best Which or Money Savings Expert recommended deal and moving to that supplier. The only minor inconveniences are 45 minutes, once a year spent doing the switch to the current best deal and a first generation smart meter I had fitted not working ‘smart’ with my current supplier. It is disappointing that companies now days exploit, rather than reward loyalty, but those who stay with a supplier on the standard tariff should recognise this and switch.

Could Which spend more time campaigning to helping those who don’t use the internet find a route to easy switching, rather than trying to get changes to the standard tariff?

Thanks for your message @davep. Which? does have a telephone service for Which? Switch.

You can call us on 0800 410 1149 or 01259 220 235.
We are open: Monday – Friday 9am to 8pm, Saturday 9am – 5pm and Sunday 10am – 5pm

You’re probably right though… We could do with promoting this service more 😳

I agree with davep. Could Which spend more time campaigning to helping those who don’t use the internet find a route to easy switching, rather than trying to get changes to the standard tariff?

Hi Dean @dsamways – It would be interesting to know how much Which? Switch and competing services charge when a customer switches their energy supplier. Last time this was discussed, Which? Switch looked cheapest, though it was complicated by the services having a price range rather than fixed prices.

It concerns me that the cost of using switching services is shared by all customers, including those who don’t use them and are probably stuck on expensive tariffs. I believe that it is possible to use any switching service for price comparison and then simply contacting the company you want to switch to.

If you don’t want Which? to get a fee, use Which?Switch to find your chosen supplier and then go direct to their website to arrange an account. they will do the switching for you.

Ofgem are likely to allow comparison sites to show only a limited range of providers. I do hope Which?Switch do not go down this route – we should have somewhere that we can easily look at all available deals. I have asked Which? about this but without a reply as yet.
@darren-shirley, are you able to comment on this please?

According to the BG interview yesterday, they have not raised electricity prices for 4 years, during which time the wholesale price of electricity for an average user has fallen by £36 (from memory). However distribution costs and government levies will have risen by £100 – so a net cost increase of around £74. This is relevant to a Convo criticising BG. A pity, if these facts are correct, Which? does not give us the whole picture.

Another figure bandied about by a politician, and in a past Convo, is that domestic energy users are being “overcharged by £1.4 billion” because they are not on the cheapest tariffs. Well, the profits last year for the “big 6” according to Ofgem were around £770 million. So if we all paid £1.4 billion less they would be making a £630 million loss. It just doesn’t stack up, this political economics, unless I have missed something. I suspect they look at the difference between standard variable tariffs, that make the profits, and fixed price tariffs that don’t, and simplistically calculate the mass saving. The energy companies will not see their profits disappear so what will they do – increase the price of the cheap tariffs accordingly and the “overcharge” calculation just collapses. I may be wrong but that is the way I see it.

Margaret Gove says:
2 August 2017

A short while ago british gas had an offer for one day’s electricity free, 9 – 5. I took them up on this offer, and my monthly bill has reduced by £30! I am not going back to paying to do my washing before I have to.

Ann B says:
2 August 2017

I also took them up on that offer and i’m staying at least until it ends in March

David says:
2 August 2017

Hi Margaret and Anne, the only way your bills could have reduced was because you were already on the very high Standard Variable Tarrif. However BG had much better fixed tarrifs at the time which I am sure would have saved you even more. I am on a Cheap Energy Club (Martin Lewis) BG Fixed tarrif October 17 Collective switch which is still the cheapest on the market. Unfortunately it runs out in a two Months – so I am now looking for my next deal. Currently they are all at least £100 / year dearer than what I am paying now! You have to look at all the market and be prepared to switch if you want the best deal. The BG free electricity on a Sunday was just a come on, making people think that they were getting something for nothing! Well, if you start off by paying say 30% over the odds it really is not a bargain when they give you a 15% (one day a week) discount – you are still paying a premium!

I believe standard variable tariffs, that make profits, subsidise fixed price fixed term tariffs that do not. Those who do not switch are the losers. So through my helpful MP I asked the question of the Dept of Business, Energy and Industrial Strategy (BEIS) – why do they not stop subsidised tariffs and thus reduce the price of SVTs accordingly. The reply said under their licence conditions “supplier cannot charge customers who are on standard variable tariffs more to subsidise customers on fixed price deals”. They go on to say these deals are cheaper because “customers manage their payments online, take their own meter readings and make monthly payments by direct debit………allowing energy suppliers to make savings on their billing and administration processes which are reflected in the cheaper tariffs”.

OK. I looked at the difference between svts and fixed price deals for an average user for 5 of the “big 6”. The differences between an svt and fixed with each company ranged from £114 to £297. Can such large savings be attributed to what BEIS say?? Ofgem publish the average “operating cost” of a major supplier as 15.8%. The savings here range from 10% to 25% – so are we to believe that operating costs can be at worst just 1/3 of an svt operating cost ( 5.8%) and at best the not only wipe out the 15.8% but save an additional 9%? I asked BEIS to explain, which they didn’t. Just a bland reply about concern about price rises, tackling unfair practices……..

I wrote (well emailed) my MP pointing out BEIS’s pointless reply and hope, eventually, to get a more considered response. I live in hope….

I have asked Which? about this but without any real interest shown. Perhaps it should be a topic to investigate. Personally I see little point in fixed price fixed term tariffs unless they are subsidised. They should not be. We should have standard variable tariffs based on real costs as the default and take out one of the factors making certain people switch. Then just choose your best supplier.

“I believe standard variable tariffs, that make profits, subsidise fixed price fixed term tariffs that do not.”

Malcolm, I’m sure you’re right – here’s a simple example, with made up numbers and a fictitious energy company, to show how that could work in theory:

Suppose BrightSpark Energy has 100,000 residential customers who annually consume 0.5TWhr of energy at a price of £0.20 per unit. These customers are all on SVT’s. Then the annual sales volume will be £100M annually or a cost of £1000 per household.

BrightSpark make 5% profit on this business, so their costs amount to £95M each year, including £30M for the wholesale costs of the generated energy at a wholesale price of £60/MWhr.

BrightSpark then manage to sign-up another 100,000 customers on a 1 year fixed term rate of £0.15 per unit. This increased sales volume allows them to negotiate a lower wholesale price of £50/MWhr and economies of scale reduce their other annual costs per customer from £650 to £550.

With these (made up) numbers, the 100,000 new customers will pay a total of £75M for a service that has actually cost £80M, so that is a LOSS of £5M on those accounts. But the costs associated with the £100M of other sales to the older SVT customers have now fallen to £80M, so the profit there is now £20M. Overall, BrightSpark have increased their annual operating profit from £5M to £15M. So they’ll be able to pay a decent dividend (not least to my pension fund) and substantial bonuses to their directors.

Having no price increase in 3 years, this equates to 50p a week increase whats all the fuss about.

50p Doesn’t sound much, but add this to a Council tax rise, water charges going up every year, fuel tax, and food prices never going down, 50p then becomes a lot if on low earnings and working seven days a week just to live!
As for Electric prices not going up for three years mine went up last year, and as on pay as you go, who pays for the stuff before it comes down the pipes and cables, we are paying far more than you lot!

I am a capped tarrif until May 2018.

I dont have my electric from Brithis Gas only my Gas

I am on a fixed tariff that wont rise until next year their website is very clear about what tariffs are on offer and whether they will cost you more or less. I get the warm home discount in winter and free electricity every Saturday so I do all my washing then. I have to say I am happy with British gas

I don’t understand the mentality of consumers who stay on a standard expensive tarrif and don’t use a capped tarrif, it seems so obvious to me to get a capped tarrif, that way if the fuel market suddenly explodes to its previous high rates you’re cushioned by the inevitable fule cost rises, and have time to look around for a switch ( if needs be ) at the end of your contract. I am currently capped until august 2018 so will avoid any rises due. It seems to me that those who can’t be bothered to do something and just sit on their backsides are the ones that are moaning about this, and everyone seems to convieniently forget all the previous rises made by the rest of the foriegn owned companies in the past 18months or so.

On a fixed tariff til July 2018. Why change now?

I’m fed up being told to switch suppliers. That is just a cop out for the Government. Yesterday I checked the “cheap” suppliers on a well-known swap site. The top three companies for price had warnings about their stability and one was being investigated. We don’t buy the cheapest car regardless of its roadworthiness and neither should we buy our energy without regard to the financial strength and efficiency of the supplier. The Government promised action during the General Election. Time to hold them to their promises.

You are protected if a supplier goes broke – as GB Energy did. You will not lose any money owed and your supply will be secure, transferred to another provider – from which you can change.

When are the government going to do something about this blatant ” robbery ” with fuel prices
All we seem to get is one increase after another , so much so about them trying to keep prices DOWN ! they must have spent millions installing Smart metres to con
us into believing we would SAVE money , and before the ink on that statement was dry the engineers were round changing the settings on the units they had installed ,then we receive notice that we can expect another increase in September.!
Long past time for Government persons to get off their Butts and fulfil their promises to the senior citizens regarding fuel charges . We do not hold too much hope in that happening as we are well used to the lies we are fed .

It seems the government are one of the culprits in increased fuel bills, through levies including the costs of smart meters. BG claim these costs have added £100 to an average bill.

A few years ago I switched from one energy supplier to another because I was told it would be cheaper. It was . A few months later the one I switched to put their prices up and was then a bit dearer. The same thing will happen now if I was to switch away from British Gas to another. My “new” supplier will inevitably play catch-up!! so whats the point?

I have recently had Solar Panels fitted. Will get a better return on the units I supply to the grid? I think not but i can dream.

Mike Pavasovic says:
2 August 2017

All energy companies rip you off. It’s a nonsense that we’re expected to change supplier every ten minutes. Soon as you change, the new company bumps the price up. I’m beginning to think things were better in the days of nationalised utilities. I don’t even trust the comparison sites. There must be something in it for them or they wouldn’t offer the “service”. Surely gas costs one price not several?

I dont fully understand how the service costs have risen
I have a smart meter for both Gas and Electric which surely must reduce the companies costs, i.e. no meter inspector to take readings.
Bills are emailed not posted and i pay by Direct Debit
Someone please explain

Tony – You should check your tariff with your supplier. Discounts for dual fuel, paperless billing and direct debit are normally factored into the tariff you are on. Acceptance of exit penalties can also reduce the tariff rate.

Margaret says:
2 August 2017

We always go on a fixed yearly rate, for Gas and Electricity, so are hoping this will remain the same, I will be asking National Gas the same question.

Tony J. says:
2 August 2017

I have recently signed up for B.G. Home Energy Capped August 2018 so I will be staying. Why people stay on Standard Tariff and then complain I shall never know.