Price protection set to end for 460,000 British Gas customers

460,000 British Gas customers are about to lose the protection of a fixed price plan that has kept their household energy prices frozen over the past five years.

According to data from uSwitch.com, the customers, who are all on British Gas’ Price Protection 2010 plan, have paid up to £473 a year less on average for their energy than other consumers. In total, this particular price protection plan has saved customers £1,153 (22%) over the past five years compared with the average standard plan, and £71 (2%) compared with cheapest online plan.

The average annual bill for the fixed price plan is £820 a year so when they took the plan out in 2005 customers were paying £85 a year more than if they were on the average standard plan. This premium soon disappeared though as household energy prices soared.

By June 2006, the fixed price plan was £95 a year cheaper than the average standard plan, but by December 2008 it was offering a saving of £473. Likewise, in 2005 the plan was £216 a year more expensive than the cheapest online energy plan in the market, but by December 2006 it was £37 a year cheaper.

As a result, while Price Protection customers have paid on average £4,100 in total for their energy over the last 5 years, the average standard plan customer has shelled out £5,253 – £1,153 more. Online customers have fared better though – those on the cheapest online plan will have paid out £4,171 over the last 5 years – just £71 more than a Price Protection customer.

uSwitch.com’s data shows that Price Protection customers started to benefit because of massive price hikes in 2006 and again in 2008, the latter when prices rocketed by 42% (nearly £400). This saw the average household energy bill hit as high as £1,293 – £473 higher than the fixed price plan. Despite prices falling since, those on the Price Protection plan have remained sitting pretty and are still saving £374 compared with the average household bill today and are paying £57 a year less than those on the cheapest online plan today.

Tom Lyon, Energy Expert at uSwitch.com, said:

“Whether by luck or by judgement everything fell into place for this group of customers. They fixed at the right time, for the right price and for the right length of time. As a result, they remained protected as energy prices rocketed and have been able to enjoy substantial savings on their bills compared with everybody else.

“Whether this good fortune can be repeated or not remains to be seen, but certainly other consumers who recently came off fixed price plans were nowhere near as lucky. Their bills actually went down when their fixed price plan ended which meant that they had been losing out rather than saving money. This shows how hard it is to get right so we would always urge consumers to think carefully before signing up for a fixed price plan.

“The good news is that even if the time isn’t right to fix consumers can do almost as well by moving to a competitive online plan. Even though the Price Protection 2010 was highly successful those on the cheapest online plan fared almost as well, paying just £71 more in total over the last 5 years for their energy. This would have required regular switching and consumers should always read the small print as many competitive plans, fixed and online, now carry an early exit penalty.”