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British Gas to scrap its most popular energy tariff

British Gas, the biggest energy company in England, Scotland and Wales, announced plans today to withdraw its standard variable gas and electricity tariff by the end of March 2018. British Gas owner Centrica announced this alongside other reforms it says will help reduce its customers’ gas and electricity bills. A new fixed-term, 12-month default tariff with no exit fees will replace the standard tariff.

So if you’re currently a British Gas on a fixed deal, from March you’ll be moved onto this default tariff if you don’t pick a new deal when yours ends. We don’t yet know how much the new default tariff will cost. British Gas is unusual among the Big Six energy companies as its cheapest fixed tariff at the moment is only GBP13 less than its standard tariff, for the average user, per year.

The British Gas standard tariff is currently the cheapest of any standard tariff from one of the Big Six energy firms. But don’t be fooled into thinking it will save you money – it’s still GBP271 pricier than the cheapest tariff on the market per year for the average user.*


If you are on British Gas’ standard tariff, you’ll be encouraged to move to another deal. But there’s no need to wait to start saving money on energy. Compare gas and electricity prices[1] now using our independent energy comparison site Which?

Switch.


British Gas customers: what this means for you

British Gas[2] will cease offering its standard tariff to new customers by March next year. If you’re one of the 4.8 million British Gas customers on its standard tariff**, you’ll be contacted with better deals and be encouraged to choose one.


Besides ending its standard tariff, British Gas said it will:

  • Offer customers a choice of at least two new deals when their tariff ends
  • Twice a year contact customers on its standard tariff about cheaper deals, and report on its progress
  • Launch an online-only tariff
  • Offer new energy tariff bundles, including boiler servicing or Hive connected-home products
  • Expand the British Gas Rewards scheme
  • Make bills simpler, and ‘no nonsense’
  • Improve its customer service
  • Improve its efficiency to keep customers’ bills down.

But it also said it believes that ‘further measures by Ofgem and the Government are required’ and argued that government policy costs should be removed from energy bills. It estimates that these will add around GBP200 to each customer’s bill next year.

British Gas MD Mark Hodges said that the proposals ‘will have a far more positive impact than a price cap. That’s because price caps don’t work’. Theresa May announced plans to cap bills for all energy customers[3] on standard tariffs last month.

A draft price cap Bill is currently being examined by the Business, Energy and Industrial Strategy select committee before it goes to Parliament. It’s not expected to be in place until the winter of 2018/19.

Will I save money on my energy bills?

Centrica chief executive, Ian Conn, said its actions ‘…start with the withdrawal of the standard variable tariff which contributes to lower levels of customer engagement.’ Which? managing director of home products and services, Alex Neill, said: ‘Scrapping standard tariffs is a big move if it means millions of British Gas’ existing customers are now going to engage in the energy market.

‘Changes that are aimed at delivering more customer engagement are welcome, although we need to see whether this does lead to people getting a better deal. ‘Any customers on poor value standard tariffs should shop around now as there are cheaper deals to be found on the market.’ Find out how you can get the best energy deal[4].


How will the British Gas announcement affect the energy market?

Centrica chief executive Ian Conn said: ‘We have long advocated that the end of the Standard Variable Tariff is the best way to encourage customers to shop around for the best energy deal.’

British Gas previously said it planned to phase out its standard tariff when it announced a price rise in August. It’s not the only big energy company to commit to phasing out its standard tariff; Eon[5], Scottish Power[6] and SSE[7] have promised similar changes. * (Pricing data from Energylinx, based on a medium user (using Ofgem averages of 3,100kWh electricity and 12,000kWh gas per year), paying by monthly direct debit, with paperless bills.

Prices are an average across all regions and correct at 20 Nov 17.)

** (Figures from Ofgem, August 2017.)

References

  1. ^ Compare gas and electricity prices (switch.which.co.uk)
  2. ^ British Gas (www.which.co.uk)
  3. ^ cap bills for all energy customers (www.which.co.uk)
  4. ^ get the best energy deal (www.which.co.uk)
  5. ^ Eon (www.which.co.uk)
  6. ^ Scottish Power (www.which.co.uk)
  7. ^ SSE (www.which.co.uk)

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