British Gas freezes energy prices – Master stroke that raises competition and a possible price war
Three of the “Big Six” energy suppliers have already raised energy prices and that too by a huge margin. All of them have raised their electricity prices by more than 8% making the bills costly to their customers. Experts had predicted British Gas would announce price hikes followed by Npower and EDF however; the supplier surprised everyone by freezing its prices until August. This could be termed as a brilliant stroke by the supplier to enjoy customer retention as well as pull off more customers who choose to leave Npower and EDF.
More recently, Scottish Power raised its energy prices leaving just three of the Big Six suppliers to either enjoy the customer retention or to bare the losses due to wholesale energy price hikes. While suppliers who have raised prices blamed the decision on the increasing cost of wholesale energy as well as the government’s order on smart meter roll-outs, the British Gas defended its decision by saying that it manages to keep the prices low by cutting down its internal costs.
By freezing the prices, British Gas has saved its five million customers from facing the price hike. Apart from saving the customers, the company has also turned the tables on the energy market. It is putting pressure on the other two of the Big Six suppliers i.e. SSE and E.ON to not plunge into increasing energy prices. As both of them had declared price freeze for the winter season, they would be compelled to postpone their decision for hiking prices in the near future.
Even smaller suppliers have to think twice before announcing price rise. Therefore, the decision byBritish Gas to freeze the prices has made a huge impact on the Big Six suppliers as well as propelled the energy sector to think differently.
The company has also proved that the statement given by Ofgem that energy suppliers can keep their prices low despite hike in wholesale energy prices holds true if the supplier decides to give benefits to the customers. This is also a signal for other suppliers that they can reduce their internal costs to give better prices and bigger benefits to the customers. In addition, the lower energy prices would keep the household bills under control and thus help customers to get a breather amidst the high inflation.
Shay Ramani, the founder of FreePriceCompare.com, leading energy comparison website, expressed his views on the topic by saying that “The British Gas has made a really smart move by holding its price hike till August. The giant energy supplier has opened the flood gates to give a stiff competition to its contemporaries. Amongst the Big Six suppliers, Npower, Scottish Power and EDF have raised prices by an enormous amount which can certainly poke their customers to make a switch to a rather more reliable and affordable supplier, the British Gas. This way, the company has created a price war which would lead to customer retention and new customer registrations.”
He also said that “This way, the company has blocked other Big Six suppliers from hiking prices. In addition, it has facilitated customers as through low energy prices the company would reduce the inflating household bills. Overall, a very smart move which would certainly cover up the loss of customers it made in last year.”
By creating a downward pressure on inflation, British Gas would help its millions of customers to keep household bills under control. The company has also confirmed that it is forming a new division called Centrica Consumer which would be aimed at developing strategies in favour of the end user. The company seems to be planning best of energy production and end-user services in order to offer tough competition to its rival suppliers.By applying positive and more competitive measures, the company is breaking the general notion that the Big Six suppliers tend to increase the prices at the same time.