British Gas to make changes after 'loss of trust'
- 24 November 2011
- From the section Business
British Gas has said it is simplifying its tariffs after acknowledging a lack of public trust in the energy industry.
Managing director Phil Bentley told the BBC's Newsnight programme his company "had not made it easy for customers".
As a result, he said all customers would be able to choose between two types of tariff - variable and fixed - and receive more transparent bills.
Earlier this year, the regulator Ofgem told energy companies they must offer simpler tariffs.
The British Gas option would have two different tariffs, but more than two different prices.
It would allow people to choose a fixed price over a set period of time, or a price that varied at the company's discretion.
However, there would be different prices charged dependent on factors such as how customers' paid. For example, paying by direct debit with online bills would be cheaper than receiving a paper bill and paying by cheque.
Following a comprehensive review of the UK energy market sparked by claims that energy companies were making excessive profits, Ofgem said suppliers needed to change the way they operated by next year.
Ofgem welcomed the move, saying that British Gas had recognised that suppliers need an "open and honest dialogue" with their customers.
It said it would examine the company's proposals in detail to see how far they met its own objectives to simplify tariffs.
Earlier this week, E.On announced it had "pressed the reset button" on its relationship with customers, while other major energy suppliers have said they are working towards simplifying their tariffs.
"As part of urgently restoring confidence we are calling on all suppliers to get behind Ofgem's reforms to deliver what consumers tell us they want - a simpler, more competitive energy market," said Ian Marlee, of Ofgem.
"Without the decisive break with the past that Ofgem's reforms offer consumers will continue to mistrust energy suppliers."
Mr Bentley told the BBC's Newsnight that British Gas was making the changes because its customers had said they did not like the current pricing structures.
"We are very conscious of our social responsibility," he said.
He said bills were going up in part due to increasing transport costs and green levies.
He also admitted that British Gas had offered cheap deals at a loss to the company in order to attract customers because they would be at the top of price comparison tables. The company would no longer be doing this, he said.
"It is not right if we are charging honest customers more [to fund these deals]," he said.
The supplier is sending a letter to all its customers explaining its new policy, in which Mr Bentley says: "It is clear that we need to make things better for our customers. To make sure we do that, I am committed to having an honest conversation with [them]."
As well as offering just two tariffs, the supplier said that, from this month, it will include a "complete breakdown" of all the costs that make up its customers' bills.
Earlier this week, British Gas announced it had secured a £13bn gas supply contract with Norway's Statoil designed to help insulate customers from volatility in global gas prices.
Hundreds of tariffs
Watchdog Consumer Focus said there had been 70 new tariffs launched this year by energy companies, bringing the total to about 400. It said that simplifying tariffs would not have a direct effect on prices.
"Energy is a simple product, it should also be a simple market. Reducing the number and complexity of tariffs will not bring prices down by itself, but it will help people understand their energy costs and get the best deal available," said Adam Scorer, of Consumer Focus.
Energy company E.On said its own review would take six months to complete, and would look at tariffs, bills, customer support and how it sells its products.
Scottish and Southern Energy said in October that it was reducing the number of tariffs it offered by 20%.
And EDF Energy said in September that it had simplified its tariffs and was happy for a Competition Commission inquiry to address the "widespread lack of understanding and suspicion of the industry as a whole".
Ofgem has said that it wants to see one standard tariff per fuel per payment option - such as by direct debit, prepayment meter, or cash or cheque.
It said fixed-term contracts would also be allowed, where the price would be unchanged or track a particular index. More details on its plans will be published in the next couple of weeks.
As well as calling for simpler tariffs following its review, the regulator said that it had found evidence the so-called big six energy firms had increased their prices in response to rising costs more quickly than they had lowered them in response to costs falling.
The suppliers, it said, should face more competition.