British Gas offers new competitive tariff

British Gas has introduced a new tariff - the WebSaver 1 tariff, which works out to be, on average, the cheapest rate around.

The new tariff promises to be at least 10% below the supplier's standard rates for the next 15 months. This means that, for the first time, customers can be assured in the knowledge that their bills will stay relatively competitive, even if the WebSaver 1 tariff is replaced with a newer version.

The move comes in the wake of criticism from the energy regulator, Ofgem, which demanded commitments from energy providers to cut electricity and gas prices. Ofgem's chief executive, Alistair Buchanan, told the six largest power companies that they should commit to passing on recent steep declines in wholesale energy prices by February at the latest.

British Gas's new WebSaver 1 tariff, which is only available online, replaces the company's Click Energy 6. The new deal is about £240 a year cheaper than the average UK energy tariff for a medium-usage home taking dual fuel. Although Click Energy 6 customers will still pay approximately £2 a year less than the new tariff, the package is no longer available to new customers.

Since a guaranteed saving of 10% is integral to the WebSaver 1 tariff until the end of March next year, should British Gas's prices drop in the spring, as many analysts have indeed forecast, then the WebSaver price will likewise go down. The only catch is that customers could face a penalty charge of up to £60 if they choose to cancel before the end of September this year, though this is not applicable in the case of home moves.

Energy bills have risen by approximately 40% over 2008 due to increasing wholesale costs. However, over the last six months, wholesale prices have decreased considerably so that the wholesale cost of gas is now only 10% more than at the beginning of the year, while the wholesale price for electricity is now 5% lower - a 40% fall since the summer peak.

The first company to reduce their rates for customers is the small electricity provider, First Utility, which has slashed its rates by 21%. However, so far, the country's six biggest energy suppliers have refused to pass on the savings.

In February 2008, Ofgem started an inquiry into the industry following large price rises. The regulator confirmed that since the inquiry began, the energy providers have made some progress, including putting an end to approximately £500m-worth of unfair charges.

Source: The Sunday Times | Last updated: 21st December 2008

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