British Gas kills off 'switch to Sainsbury's Energy' loophole

Since 30 December Sainsbury's Energy's prices have been changed to exactly match those of British Gas – the energy supplier that's really behind it. That means you'll no longer save by switching to Sainsbury's.

The price changes come after a new Ofgem rule was brought in on 1 October. This states suppliers must show all the cheapest alternative tariffs they offer on customers' statements, including tariffs offered by 'white label' partners. As a result, British Gas has to tell its nine million customers when they’re able to save by switching to its sub-brand Sainsbury's Energy.

While Sainsbury's Energy's standard tariff has been the same as British Gas's, through its Sainsbury's Energy arm British Gas offered significantly cheaper fixes and these are now no longer available.

'This is the white-label rule backfiring'

Martin Lewis, founder of MoneySavingExpert.com and Cheap Energy Club, says: "There are many people who are scared of switching. It's one of the reasons 70% of people in the UK are still massively overpaying by being on a 'big six' standard tariff. 

"British Gas as the UK's biggest energy supplier unsurprisingly has the most of these loyal customers – therefore the ability to say 'you can switch to Sainsbury's and save large, it's just British Gas in disguise' was a powerful first step to get them on the road to switching. "This new you-must-show-all-tariffs rule on the surface is a good move, but this backfire was easy to predict. It's something I've already spoken to Ofgem about, as big suppliers are less keen to offer collective switches now because the rules may mean they have to show the deals to all their customers.

"It seems British Gas has decided it is safer to charge everyone more rather than be forced to push the far-cheaper prices of its sub-brand in the face of all its customers. "It may mean that in the hope everyone will see cheaper prices, far fewer cheap deals will actually be offered by big firms. Ofgem needs to do some work to model the exact consequences and see which move is for the greater good. "In the meantime, it's worth noting no new British Gas or Sainsbury's deals are remotely competitive. If you're one of their customers ensure you do a comparison to see if you could save substantially by switching elsewhere."

British Gas kills off 'switch to Sainsbury's Energy' loophole

How much more will new customers pay?

Sainsbury's Energy replaced two fixed tariffs on 30 December.

• It's removed its Fixed Price December 2016 tariff (previously an average £892/year) and its Price Promise December 2016 tariff (an average £920/year).

• Its new tariffs are fixed for longer – the Fix and Reward September 2017 tariff is an average £1,075/year, while the Fixed Price July 2018 tariff is an average £1,043/year.

• The price of its Fix and Reward March 2017 and standard variable tariffs remain unchanged (both are an average £1,075/year).

The cheapest tariff on the market right now, though, is typically more than £250/year cheaper than Sainsbury's Energy – it's a variable tariff from GB Energy at an average £787/year. The cheapest fix is offered by Extra Energy at an average £794/year. Head to Cheap Energy Club to do a full comparison for your area and usage.

How will existing Sainsbury's Energy customers be affected?

If you already have a cheap fix with Sainsbury's Energy you won't be affected, as your price is locked in for the duration. But remember to switch again when your fix is up to avoid being moved onto Sainsbury's Energy's hefty standard tariff – which like British Gas's standard tariff is an average of £1,075/year for those on typical usage.

Those already on Sainsbury's Energy's standard tariff won't actually see their prices go up either, as that tariff is unchanged. But you're likely to be still paying way over the odds, so do a Cheap Energy Club comparison now to see how much you can save.

What does British Gas say?

We asked British Gas whether the change in Sainsbury's Energy prices was due to the new Ofgem rules on white-label pricing, but it said it wouldn't comment on "pricing strategy".

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