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British Gas simplifies energy tariffs – time to throw a party?

We’ve previously asked for your help to tackle energy tariffs. Now, it seems, some suppliers are listening. Although British Gas has made a step in the right direction, we’re still a long way off simple tariffs for all.

There was a flurry of excitement in our office this week, as emails went flying round about British Gas’ plans to simplify its energy tariffs. Hooray! With your help we’ve been putting pressure on Ofgem to do this, and getting companies to do it before Ofgem feels like a real success. Unfortunately, it’s not quite that simple.

British Gas announced today that it’s ‘simplifying’ its energy tariffs – it will have just fixed and variable. That’s great – it means much less confusion for customers as they wade through the British Gas website trying to work out which tariff they should be on.

What’s wrong with energy tariffs?

But many problems still remain. For a start, the new British Gas tariffs still have a ‘tiered’ structure – where you pay more for your first units of energy. This is something Ofgem is unlikely to be too chuffed about.

At a recent session of the Energy Select Committee, Ofgem’s chief exec described tiers as an ‘unnecessary complication’ that he hoped would be ‘flushed out’ by its tariff reforms. We agree that tiers are confusing, but we also think there should be more regulation of tariffs, full stop.

We understand suppliers must add fixed costs to cover their overheads (like transporting energy to your home) but suppliers shouldn’t have free reign over these costs. Ofgem must ensure that the fixed costs everyone has to pay are kept as low as possible. This is essential to prevent low energy users paying significantly more per unit than high users.

Moreover, there are still issues with how tariffs are presented – you can pay for your energy by direct debit, cheque or over the phone, but will your costs be presented simply?

One of our real bugbears about energy tariffs is that, in order to work out how much you’re paying, you often have to work out complex discounts that aren’t included in the unit price but somehow separated out – our investigation showed that people find it very difficult to do this.

What do we want?

Well, we think it’s pretty easy – there’s needs to be one simple tariff system. There’d be a low daily standing charge set by the regulator (to cover just the costs of keeping you connected) and on top of that, a unit price set by your company which includes all discounts.

It’d be like going into the supermarket to buy a tin of beans – you can simply compare the prices side-by-side and choose the one that’s cheapest. Like beans, gas and electricity aren’t complex products – so why do the suppliers make it so difficult to understand?

In the meantime, I don’t want to sound negative. I say, well done to British Gas, and it’s not often that you’ll find me praising an energy company!

However, it really is just a tiny start – there’s much more that needs to be done. It’s great when energy companies respond to our calls, but we can’t expect them to do exactly what we want. That’s why we have regulators. We need action from Ofgem, and if it doesn’t go far enough, we need the government to tackle confusing energy tariffs once and for all.


While I was reading this article I was cold-called by E.On who wanted to “have a discussion with me” about the latest hike in energy prices. Presumably they were hoping to convince me that I should switch to their latest tariff. E.On is one of several energy companies who have forsaken my trust [like BG] and my golden rule is never to go back to somebody who has exploited you before. So recently I changed to The Cooperative Energy; it might not yet be the lowest cost overall but the straightforward simplicity and fairness of their pricing structure with a flat-rate standing charge and a single unit-price irrespective of consumption is very attractive. It also has no lock-in terms and no exit penalty. Their price guarantee is that they will aim to be consistently competitive over the longer term and they give thirty days notice of any necessary increases. The way they handled the latest increase was a model of responsible practice toweards consumers. Until the regulator fully implements the Which? proposals I think the Coop is the closest an average household can get to good terms and fair conditions. Ebico might be similar but the absence of a standing charge might only be good for very low users which won’t apply to people at home all day.

A step in the right direction but as the article says these new BG tariffs are still ‘tiered’ which something I’ve never liked because it is a way of hiding any standing charge. Also different levels at which competing suppliers pitch their “tiered” prices still make comparison difficult without taking into account annual usage and spending time punching a calculator.
I’d like to see no “tiering”, no standing charges just a unit price. Then we’ll know where we are.
My only concession to this would perhaps be “tiering” in the other direction, that is with the unit price increasing for very heavy users. Initial units could then be cheaper thus giving those in danger of “fuel poverty” a bit of a chance.

Of course overall however energy prices are pitch they’re still too high.
I’d be happier with the whole cartel re-nationalised, (cartel because the long term difference in price between suppliers is not much so switching gains are usually short lived). The profit which is mandatory for private companies could in a nationalised operation be either ploughed back into infrastructure or not taken thus giving us all lower bills.

Roy Adams says:
21 February 2012

I read this article hoping it would explain how British Gas work out how many kWh go in tier 1 and tier 2. They give great lengthy explanations of how to work out the kWh from the units and the formula. However the tiered calculation seems to have no exact science with no explanation. In general the more you use the less of a percent goes in tier 1 but in some cases this is not true.
From my last 7 bills the cost of Tier 1 varies from 10% to 30% how are we able to estimate our future bills?