We lost trust, British Gas says

23 November 2011 Last updated at 18:20 ET

The regulator Ofgem has told energy companies to make their tariffs simpler

British Gas has said it is simplifying its tariffs after acknowledging a lack of public trust in the energy industry.

Managing director Phil Bentley told the BBC his company "had not made it easy for customers".

As a result, he said all customers will be able to choose between two tariffs - variable and fixed - and benefit from more transparent bills.

Earlier this year, the regulator Ofgem told energy companies they must offer simpler tariffs.

Following a comprehensive review of the UK energy market sparked by claims that energy companies were making excessive profits, Ofgem said suppliers needed to change the way they operated by next year.

Ofgem welcomed British Gas's "recognition that suppliers need an open and honest dialogue with their customers".

It said it would examine the company's proposals "in detail" to see how far they met its own objectives to simplify tariffs.

Earlier this week, E.On announced it had "pressed the reset button" on its relationship with customers, while other major energy suppliers have said they are working towards simplifying their tariffs.

'Complete breakdown'

Mr Bentley told the BBC that British Gas was making the changes because its customers had said they did not like the current pricing structures.

"We are very conscious of our social responsibility," he said.

He said bills were going up in part due to increasing transport costs and green levies.

He also admitted that British Gas had offered cheap deals as loss leaders in order to attract customers. The company would no longer be doing this, he said.

"It's not right if we are charging honest customers more [to fund these deals]," he said.

The supplier is sending a letter to all its customers explaining its new policy, in which Mr Bentley says: "It's clear that we need to make things better for our customers. To make sure we do that, I'm committed to having an honest conversation with [them]."

As well as offering just two tariffs, the supplier said that, from this month, it will include a "complete breakdown" of all the costs that make up its customers' bills.

Earlier this week, British Gas announced it had secured a £13bn gas supply contract with Norway's Statoil designed to help insulate customers from volatility in global gas prices.

E.On said its own review would take six months to complete, and would look at tariffs, bills, customer support and how it sells its products.

As well as calling for simpler tariffs following its review, Ofgem said it had found evidence the so-called big six energy firms had increased their prices in response to rising costs more quickly than they had lowered them in response to costs falling.

The suppliers, it said, should face more competition.