British Gas unveils energy deal that saves you £229 – but there’s a catch

energy bills
energy bills

British Gas has launched a fixed-rate deal that promises to save households money on their bills by undercutting the price cap.

Its new Price Promise tariff, which is available to both new and existing customers, costs a typical household £1,699 a year, making it £229 cheaper than the cap set by the regulator Ofgem.

From April the cap is forecast to drop to £1,620 a year, according to analysts Cornwall Insight, but British Gas has vowed to lower rates on its new deal so that households still pay less.

Catherine O’Kelly, managing director of British Gas Energy, said the new tariff would enable customers to “feel the benefits of lower energy costs as soon as possible – and can take advantage of them while using more energy in the winter period”.

Consumers have been waiting for an energy deal worth switching to since the invasion of Ukraine led to a sharp increase in costs.

However, British Gas’s 15-month fix only guarantees cheaper rates for five months: the two months of the January price cap, and the April cap which lasts until the end of June.

Cornwall Insight predicts the price cap will fall to £1,497 in July, and then rise to £1,552 in September, meaning households who fix may end up locked into higher rates, or face exit fees of up to £150.

Consumers should also be aware that British Gas charges exit fees of £75 each for gas and electricity if customers want to switch providers. Customers will still be hit with the charge if they stay with British Gas but move to the standard variable tariff governed by the price cap.

It means those taking advantage of the cheaper deal now could be penalised for moving back to a variable deal if the price cap falls further later in the year – wiping out any savings.

Consumer champion Martyn James said fixed deals “had always been the domain of the cautious consumer”, but advised consumers to carefully consider the small print of the deal before deciding whether it made sense to switch, saying the “house always wins”.

He added: “While it’s good that British Gas has agreed to charge less than that price cap in April – price matching, in other words – it’s noticeable that this is a fixed tariff for 15 months. So in effect, this locks you in for a year.”

Last week, the energy regulator announced a crackdown on providers switching customers too slowly. Suppliers must now pay a customer £30 in compensation if their switch is not processed in five days.

Melissa Giordano, deputy director for Retail Systems and Processes at Ofgem, said: “Customers who see better energy deals on the market or experience poor service must be able to vote with their feet and move energy supplier quickly.”

Ofgem is due to announce the energy rates for April on Friday, February 23. British Gas refused to confirm by how much it will undercut April’s price cap, but the provider said that rates would not go up for the remainder of the 15-month fix.

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