British Gas announced today that they are increasing electricity and gas prices for those on a standard tariff as of 29 May.
Those on British Gas’ standard tariff will see their prices rise by over 5%, to an average of over £1,100 per year. The firm has justified this increase by stating that the cost of producing energy has risen as well, however, British Gas are the first supplier to hike up their prices this Spring.
British Gas is the UK’s biggest energy provider. They supply 11 million homes and one million businesses with energy in the UK, and are one of the energy providers that makes up the ‘Big 6,’ the six largest suppliers who dominate the energy industry.
What is a standard (variable) tariff?
Standard variable tariffs (something that British Gas scrapped last month but their standard tariff is effectively the same thing) are the default tariffs that customers are put on and are often the most expensive tariffs that providers offer. Customers will be put on a standard variable tariff if they move into a new property.
The change in address and personnel at the property means that the previous energy tariff that the last owner was on has ended, however, the same supplier will continue to provide energy to the property. This is when that supplier will put the new occupant of the property onto their standard variable tariff.
Equally, a customer will be put onto a standard variable tariff when their existing contract or tariff has ended and they have not renegotiated a new deal or switched provider. On a standard variable tariff, customers pay on average around 30% more for their energy than those who seek the cheapest alternative.
Considering the average spend on electricity and gas for the year on a standard variable tariff is over £1000, that is easily over £300 that could be save just by switching energy providers and tariffs.
Can I exit a standard variable tariff or switch providers for free?
Yes. A standard variable tariff is effectively a rolling tariff and there is no fixed date for which you are locked-into that contract for. This means you are free to leave at any time and it won’t cost you a penny.
How will this British Gas move affect the rest of the energy market?
With British Gas breaking rank by being the first provider to raise their prices this term, will this prompt others to follow?
It is likely that other providers will use a similar story of rising energy production costs to justify a subsequent rise in prices. If the energy-production-cost line is true, then it would make sense for all providers to increase their prices.
Equally, if it is simply a fabrication created to justify price rises, other providers will likely still follow suit as it is a good opportunity to boost profit. If every company is doing the same, there will be minimal individual backlash for a provider if they were to raise prices. British Gas are brave in someway, effectively taking the initial ‘hit for the team’ so that industry energy prices will rise as a whole.
What does this all mean now?
The price rise for energy providers’ standard variable tariffs only further highlights the importance of switching tariffs when moving house or when your existing tariff ends. Standard variable tariffs play a huge part in energy providers making large profits, with customers either not aware or not interested in switching providers to seek a cheaper tariff.
I might be on a standard variable tariff now, what should I do?
Get in touch with us! Our free service helps people in your situation every day. In one quick call we will be able to see how much you are paying on the standard variable tariff, get quotes for the cheapest providers and tariffs available for you and if you are happy with what we recommend we can set you up on a new tariff there and then.
You won’t even have to get in touch with your current provider to cancel your existing tariff as your new provider will do that for you when they take over at the property!
I don’t think I am on a standard variable tariff but believe I am paying too much for energy?
If you feel your energy bills are too expensive, feel free to get in touch with us as well.
For the sake of a quick, free call, you could still end up saving a lot of money. You will get straight through to one of our advisers who can assist you on the best action to take in your situation.