British Gas will soon be forced to tell its 9 million domestic customers that they may be able to cut their energy bills by £175 a year by switching to Sainsbury’s Energy.
Watchdog Ofgem has announced rules which mean that from July, major power suppliers will have to alert their customers if their cheapest deal is marketed under a different brand.
The move comes 48 hours after the competition regulator said major power suppliers were charging loyal customers up to £234 a year more than those who shop around.
The Ofgem regime affects those energy giants that have partnered with retailers and other companies in order to sell gas and electricity under the latter’s name.
For example, British Gas offers products and services under the Sainsbury’s Energy brand, while SSE works with Marks & Spencer to provide M&S Energy.
Suppliers have to tell customers about their cheapest deal, but up until now this rule has not applied to the “white label” tariffs offered by retailers. However, this apparent loophole will now be closed.
Ofgem said that from July, any supplier selling energy via this type of link-up “will have to be more transparent and tell customers what their cheapest tariff is, regardless of the brand they use”.
Based on current pricing, the changes mean British Gas would be obliged to tell its household customers that they could cut their bills by switching to Sainsbury’s Energy.
The Sainsbury’s Energy website states that its cheapest dual fuel deal, Fixed Price February 2016, would cost an average household £922 a year. By contrast, British Gas’s own cheapest tariff, Price Promise February 2016, would set the same household back £1,099 a year, according to Joe Malinowski at comparison site TheEnergyShop.com. That is a difference of £177.
As things stand, SSE would not be impacted by the change, as its cheapest tariff and that offered by M&S Energy appear to be almost identical.
“This policy will hurt the incumbents who are using white label brands for acquisition,” Malinowski said. “In particular, at the current time British Gas is acquiring a lot of customers under the Sainsbury’s Energy brand.”
Rachel Fletcher, a senior partner at Ofgem, said selling energy via white label partnerships had the potential to boost consumer choice and engage consumers attracted to well-known brands, but she added: “It is important that consumers are given the complete picture about all their supplier’s tariffs. That is why we are acting to … ensure suppliers have to tell consumers what their cheapest deal is, whatever brand it is marketed under.”
The white label brands will also have to tell their customers if the partner supplier has a cheaper deal, but they will not have to tell people about any cheaper tariffs offered by the supplier’s other partners.
Ofgem said it would be consulting on the final wording, and expected the new regulations to come into force in July.
On 18 February, Ed Davey, the energy secretary, warned that Britain’s big energy suppliers risk being broken up after the Competition and Markets Authority found that 95% of dual fuel customers on standard variable tariffs could have saved £158 to £234 a year if they had switched provider between early 2012 and early 2014.
