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British Gas is actually just 1.4% cheaper

Neil Faulkner
by Lovemoney Staff Neil Faulkner on 07 May 2009  |  Comments 8 comments

British Gas claims it's got 10% cheaper on energy, but it's more like 10% of 10%!

As we predicted when British Gas made the first energy move at the beginning of the year, it wasn't the end. (Read British Gas' 10% cut is just the beginning.) After raising prices by more than any other supplier last year, it reduced gas prices a few months ago by 10%. Today it's matched that with an immediate 10% reduction for electricity.

Well, sort of...

It's important to realise that British Gas has reduced prices on its standard tariff only.  Like the other big energy companies, its standard tariff is extremely expensive and always has been. (Standard tariffs are the tariffs you're put on when you move house, or if you've never switched.)

British Gas wasn't alone in reducing just the expensive tariffs. Every single one of Britain's six biggest energy companies claimed to reduce prices this year, but only the expensive tariffs got cheaper. The tariffs at the top of our comparison tables remained the same (and they were still more than £100 cheaper on average than the standard tariffs). You can read more about this in Recent energy-price reductions were a sham.

British Gas' new tariff

This time, though, BG (may I call you BG?) has simultaneously released a new version of a tariff that has actually made a few pounds' difference to the top of the table. When I say a few pounds, I mean an average 1.4% in all my tests. Not 10%, like the headlines say.

BG's cheapest tariff has been its Websaver tariffs. Websaver version 1 had a guarantee to remain at least 10% below BG's standard tariff. It's no longer available to new customers, but if you're still on it, great! You're probably paying not a huge amount more than the very top tariff. In some cases, you'll actually still have the cheapest tariff. (The cheapest tariff varies depending on where you live and the amount of energy you use.)

Websaver 2 has been competitive, but it came with a less attractive guarantee: it would always be at least 6% below BG's standard tariff. This morning, for an average user in Farnborough, it was  8.5% cheaper. (I always use Farnborough - a Guildford post code - for consistency.)

However, that's probably about to change for the worse, as it has just been removed for new applications and replaced with Websaver 3. In my tests this morning it was just a few pounds cheaper than Websaver 2. It offers the same guarantee of 6% off, but for the average user in Farnborough it's currently 10% cheaper.

Here's how energy prices look currently in Farnborough. I've included British Gas' removed tariff Websaver version 2 so you can see how little difference BG's new cheapest tariff makes:

British Gas prices vs the cheapest tariff (Farnborough)

Energy usage

Cheapest tariff

BG Websaver 3

(introduced this morning)

BG Websaver 2

(new applications not accepted)

BG's standard tariff (new prices as of today)

 

Low use

£526 (npower Sign Online 15)

£576

£584

£631

Medium use

See BG Websaver 3

£1,022

£1,037

£1,136

High use

£1,406 (E.ON Fix Online)

£1,419

Sorry, the data was unavailable*

£1,578

*I was too slow to capture this data before the comparison tables were updated with BG's new tariff this morning. Surely it was just a few pounds more than Websaver 3, though?

As you can see, it's a lot of manoeuvring for little real result. Prices are a few pounds lower, although it is likely that Websaver 2 customers will find their prices rising further soon. That's often (but certainly not always) the point of versioned tariffs: the supplier can introduce new ones to attract business, and then let the price drift upwards as it introduces further new ones.

It may seem hard to find a tariff that will last, but here are some points to consider:

  • If you take any online discounted tariff, you'll pay vastly less than you do on the standard tariff. Most people will save more than £100 per year, and many closer to £200. So it really is worth doing.
  • Forget about the automatic 10% decrease to the standard tariff. Anyone on BG's standard tariff will pay almost 16% less (at least!) if they switch to its new Websaver 3 tariff. (Not all suppliers let you switch to their cheaper tariffs, but you're allowed to switch online and through comparison sites from BG's standard tariff to this one.)
  • If you remain on a variable tariff for too long, it will inevitably drift up in price. Hence why we recommend you compare prices once a year (but check for exit fees in your existing tariff).
  • You can sometimes find tariffs worth sticking with for a while, such as Websaver version 1.
  • There is also at least one great fixed deal available at present. Look for E.ON Fix Online, which often appears near or at the top in comparison results. For many, it could turn out to be the best deal once it's taken you through your winter heating bills. (This tariff could disappear at any time.)

What's going to happen to prices now?

Most suppliers, I believe, won't cut their own electricity prices again. However, npower has been losing its leading position on acquiring new customers recently, so it should finally react.

I doubt it'll make more than a few pounds difference to the top tariffs though. So if you've got a top tariff, you're home and dry. If you haven't - well, it's high time you did something about that, isn't it?

> Compare gas and electricity prices for all suppliers through lovemoney.com. You'll get the same price as going direct, and sometimes cheaper!

> Read Utility Warehouse: can it be cheap?

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Comments (8)

  • Neil Faulkner
    Love rating 32
    Neil Faulkner said

    Btw, nickp, if BG has reduced the amount you are giving them each month by direct debit, it's highly likely you've built up a huge credit with them. If you need the cash and/or don't want to keep giving BG a whopping interest-free loan, I'd find out how much you're in credit and tell them to pay me back.

    Neil

    Report on 08 May 2009  |  Love thisLove  0 loves
  • Chancer9
    Love rating 2
    Chancer9 said

    The regulator needs to investigate energy prices. When petrol prices were going through the roof, gas and electricity providers were pushing up their prices saying this was caussing increases to them in providing energy. Here we are over a year later with sustained falls in the price of oil but only paltry reductions in gas and electricity tariffs.

    The other reason given for increasing gas and electricity prices was increased demand both in the UK and the continent. The price spike in utilities caused many intensive users of gas and electricity to close factories and relocate to low cost economies where wages were cheaper, even if gas and electricity isn't, recuding demand for them. Demand should also have decreased due to the shutdowns the car industry has had and the slowdown in construction and other manufacturing facilites. Large industrial users tend to be locked into supply contracts, so the gas and electricity not used during shut downs will have been paid for anyway. Are the utility companies charging us twice for the same gas and electricity. 

    There may have been reasons to increase gas and electricity a year to eighteen months ago, but as far as I can see these have all evaporated. There needs to be a Stewards enquiry into why gas and electricity prices have not fallen back more than they have to date. If need be the government should legislate to force the reductions.

    Report on 10 May 2009  |  Love thisLove  0 loves

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