In the same way that tracker mortgages are linked to Bank of England rates, the British Gas Market Tracker will follow changes in the wholesale gas and electricity markets more closely than the traditional energy bill, where price adjustments are smoothed over a period of time to protect customers from volatile commodity movements.
The British Gas Market Tracker will commence tracking wholesale prices from September 1, 2007 until August 31, 2008. Prices will be set at the beginning of each quarter, on December 4, 2007, March 4, 2008 and June 3, 2008. The prices will then be fixed for the remainder of that quarter.
We’ve already cut prices by over GBP200 on average for customers this year; now we are offering a transparent product that allows customers to follow the true rise and fall of the wholesale market. Traditionally, energy companies smooth the changes in commodity costs over a period of time to protect customers from volatility in the wholesale market. This new product is for those people who understand and accept the risk that their bills could move up or down far more frequently – but they are guaranteed that their bills are reviewed every quarter, commented British Gas managing director Phil Bentley.
However, comparison and switching service provider uSwitch has warned that the new tracker product should be treated with caution.
It is an interesting and innovative product. But with wholesale energy prices predicted to be on the way up, this new energy plan needs a ‘buyer beware’ stamp on it. It will only be suitable for a very special type of consumer, who is completely comfortable with the idea that their energy bills could go up as well as down on a far more frequent basis, stated Geoff Slaughter, energy manager at uSwitch.com.
Although British Gas acknowledges this, what isn’t clear at the moment is how they intend to ensure that it is only taken up by those who fully understand it and who are completely aware of the risks, he continued.
