British Gas launches simplified tariffs and bills

The energy giant British Gas is overhauling the way it calculates bills and making them easier to understand.

British Gas has simplified its confusing price structure with two new tariffs and ‘de-cluttered’ the format of its bills.

That's what the energy giant reckons anyway. But will it make our bills cheaper and easier to understand?

The tariffs

British Gas has simplified its tariffs into just two types, Variable and Fixed.

The new tariffs replace the confusing Tier 1 and Tier 2 systems and at the moment there are four deals to choose from.

Clear & Simple is a variable tariff available to customers wishing to pay by direct debit, cash or on pay as you go and comes in at an average monthly cost* of £99 for dual fuel customers (gas only is £63 and electricity only is £38). There is no cancellation fee on this contract so you are not tied in.

The Discount Variable deal offers a 4% discount on the Clear & Simple tariff and costs £95 a month on average* if you choose the dual fuel option (gas only would be around £60 and electricity alone would be about £36). However, there is a £30 cancellation fee per fuel if you decide to switch later on.

The Online Variable is the cheapest of all the new deals and is suitable for customers who are happy to manage their account online, with no paper bills. The average cost* has a 6% discount and is £93 a month for dual fuel customers (£59 gas only and £36 electricity only) but comes with a cancellation fee of £30 per fuel should you change your mind.

The only Fixed tariff on offer is set until May 2014. Dual fuel customers pay slightly more for the peace of mind at an average* of £108 a month (gas only is £68 and electricity only is £41) and to cancel there is a hefty £50 cost per fuel.

The new tariffs are only available for new customers at the moment but existing customers can choose to switch. British Gas will consider moving all existing customers over once the direction on tariff structures is confirmed by Ofgem in its Retail Market Review.

How they compare

The fact that British Gas's new tariffs are more competitive is obviously a good thing. The trouble is, they aren't that competitive and are easily beaten by many other deals. Check out the ten cheapest energy deals around at the moment.

Source: Energyhelpline.com

Average cost based on customer paying by monthly direct debit, on dual fuel option consuming 16,500kWh gas and 3,300kWh electricity. Prices correct as of 26/06/2012.

Changing how bills are calculated

Perhaps more significant than the new tariffs are the changes British Gas is making to how it calculates energy bills from now on.

A new single flat rate for energy consumption has been introduced alongside a fixed standing charge to make it simpler for customers to understand what they are paying for and the costs they are able to control.

It is also meant to make comparing the tariffs to other companies a lot simpler too, which is handy considering there are hundreds of deals available at the moment, making it a tricky task to work out which represents the best value.

The standing charge is common to all energy suppliers and is meant to represent the fixed costs for an energy company like British Gas. These costs include the expense of maintaining the infrastructure to transport and distribute energy to homes, social and environmental fees set by the Government and supporting vulnerable customers.

The standing charge is applied even if you do not use any gas or electricity.

Instead of a tiered pricing system which made calculating your bill extremely difficult, an average dual fuel customer who pays quarterly through cash or cheque will now pay a standing charge of 52p a day or £190 a year.

The new bill

Although the new tariffs are initially only for new customers or existing customers that choose to switch, all British Gas customers will benefit from the new bills from this summer.

The energy giant claims the new simpler bill has been ‘de-cluttered’ of jargon and is free of repetition so customers will be receiving a clearer more straightforward letter or online statement.

The new look bill is split into four areas that include the amount owed, the due date of the payment, the amount of energy used and ways to contact British Gas.

The new ‘Can I save money section?’ will offer customers personalised advice on how to keep energy costs down, like the savings that could be had paying by direct debit, information about other tariffs which could be cheaper and ways to stay energy efficient.

*Based on average consumption of 16,500 kWh for gas and 3,300 kWh for single rate electricity, averaged across all regions, paying by monthly Direct Debit, rounded and including VAT. Prices as at 22nd June 2012.

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