British Gas reacts to Ofgem's white label loophole with single cheapest tariff across brands

Justin King (left) launching Sainsbury's Energy with British Gas
Justin King (left) launching Sainsbury's Energy with British Gas

Customers on British Gas and Sainsbury's Energy will be offered the same cheapest tariff, after Marketing revealed a loophole in Ofgem rules that could be exploited to avoid a crackdown on transparency.

British Gas is preparing to make a formal announcement tomorrow (16 January) that British Gas customers will be offered the cheapest tariff on Sainsbury’s Energy, a white label brand it set up in partnership with Sainsbury’s.

Yesterday morning, a search on price comparison site uSwitch found a three-bedroom family house on a standard tariff in south-east London using British Gas would save £208.47 by switching to Sainsbury’s Energy.

Marketing revealed that British Gas and SSE could exploit a loophole in Ofgem's rules to avoid telling its customers they can get a cheaper deal on their white-label brands.

Ofgem has been attempting to increase transparency in the industry, but its Retail Marketing Review (RMR) rules do not yet cater for white-label brands.

An Ofgem spokesman told Marketing that it needed to give "further consideration" to the right regulatory framework for the white-label business model and, as a result, will be publishing a call for evidence at the end of this month.

He added: "In the interim, we have granted an exemption from certain RMR rules until 31 December 2014 for white-label providers that were in existence on or before 1 March 2013."

British Gas partnered with Sainsbury’s and SSE tied with M&S to launch white-label brands under the Sainsbury’s Energy and M&S Energy brand names before March last year.

SSE has not yet revealed if it will inform both SSE and M&S Energy customers of its cheapest tariff as a gesture of goodwill.

An SSE spokesperson said: "Suppliers are required to tell customers about their own cheapest tariff in written communications like bills, annual statements and letters.

"This does not currently extend to white-label brands, although Ofgem is considering implementing changes at the end of 2014." 

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