British Gas launches wholesale market tracker


Phil Bentley,
Managing Director,
British Gas
Windsor, U.K. — (METERING.COM) — July 23, 2007 – U. K. utility British Gas has launched a wholesale market tracker for its domestic energy customers, which will allow customers’ bills to be reviewed every quarter as it tracks the commodity price and reflects any movements in the quarterly bills

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.

British Gas Managing Director, Phil Bentley said: “We’ve already cut prices by over £200 [$400] 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.

“As the mortgage market has successfully done, we now have a product to match the risk portfolio for all customers – from those who want long term security with fixed prices to those who want cheap internet deals and now those who want to be closer to the true market costs with our tracker.”

The price of the gas and electricity supplied by British Gas is made up of energy costs which vary, and fixed costs like metering, billing and transportation of energy. In the opening price for the British Gas Market Tracker the variable energy costs make up 51% of gas prices and 41% of electricity prices. The Market Tracker will track changes in Heren prices, and the variable part of the price may change as a result of any changes in Heren prices.

The British Gas Market Tracker prices will start tracking wholesale prices from 1 September 2007 until 31 August 2008. Prices will be set at the beginning of each quarter on the following dates: 4 December 2007, 4 March 2008 and 3 June 2008. The prices are then fixed for the remainder of that quarter.

The prices may change at each of these dates to reflect movements in the published Heren prices. The prices will reflect the average published wholesale price for the remaining period of the Market Tracker agreement at each of these dates. An average published price during the first 15 trading days of the month before the review date will be used to set the prices. Prices will only change if movements in the wholesale price mean that the average customer’s annual electricity or gas bill (20,500 kWh per year gas or 3,300 kWh per year electricity ) will change by more than £5 ($10) up or down.

Customers can sign up to the British Gas Market Tracker offer from 17 July. The utility plans to review the Tracker towards the end of the contract, to ensure it is providing a service that customers want and that works. Depending on the feedback, British Gas will look to update this Tracker with another version from 1 September 2008.