- Britain’s largest energy firm has new tariff pledging to undercut the price cap
- The deal only promises to save households money on energy bills until July
British Gas has launched a fixed-rate energy deal it promises will beat the Ofgem price cap until at least July.
Britain’s largest energy firm has unveiled its Price Promise tariff which costs £1,699 a year for the average dual fuel household.
That is £229 below the current Ofgem price cap level of £1,928 a year.
The selling point of the deal is that it also promises to beat the price cap from April, when expert analysts at Cornwall Insight say this will drop to £1,620 a year.
Price-buster?: British Gas’s new energy deal promises to beat the price cap – but not forever
However, this price-busting deal only runs for the first five months, or one-third of the overall deal length of 15 months.
After that point, British Gas customers may end up paying more than any price-capped rate, and face high exit fees to leave early.
Catherine O’Kelly, of British Gas, said: ‘We are always looking for ways to help our customers save and we want to make sure they 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.
‘They also have peace of mind that if the price cap drops in April and is cheaper than this tariff, we’ll lower our rates to beat it.’
Is the new deal any good?
To work out if the British Gas deal is cheaper than your current deal, use a price comparison tool on the energy firm’s website.
An example two-bedroom, two-person household currently paying £131 a month for gas and electricity is being quoted £102.63 a month with the Price Promise deal – a saving of £28.37 a month.
But of course that saving only applies until April, when Ofgem resets its price cap again.
British Gas has not said what it will charge customers for the Price Promise tariff past April, but does promise to beat whatever the new price cap will be.
That means customers will pay a rate below the price cap until the price cap is reset again, in July.
Past that point British Gas has made no promises that its tariff will beat the Ofgem price cap.
That could mean customers who take the Price Promise deal out today risk paying rates above the Ofgem price cap for as long as 10 months, as the deal is fixed for 15 months.
Getting out of the Price Promise deal before the 15-month end point means paying fairly hefty exit fees.
What are the exit fees?
The exit fees for the Price Promise tariff are £75 each for gas and electricity.
That is steep by historical standards, when exit fees typically topped out at £30 per fuel – with many deals not having them at all.
Sadly £75 per fuel exit fees are about average now, as energy firms have been hiking these charges.
There are no exit fees for the Price Promise if you swap to another British Gas fixed tariff, although these fees can be even higher on the energy firm’s other fixes.
For example, exit fees are £200 each per fuel on British Gas’s The Fixed One 24M v5 energy tariff.