Gas discount likely to draw fire

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The Independent Online
MARY FAGAN

and PETER RODGERS

British Gas is braced for a public outcry over a new discount scheme for prompt payers and changes planned for domestic service contracts.

The discount scheme, which could be announced as early as this week, is expected to be criticised for falling far short of the existing five per cent discounts for those who pay by monthly direct debit.

This is one of a series of tough decisions the company is taking as part of a policy of selling services at prices that reflect true costs. It is planning the moves despite continued fallout from the public relations fiascos it suffered earlier this year, including the 71.8 per cent pay increase for Cedric Brown, its chief executive.

Senior management believes it has no option but to press ahead with reforms of its pricing. Competition in the domestic gas market will be stepped up next year, when pilot schemes will allow other suppliers to compete for the first time.

The direct debit discount, introduced in January, was widely criticised by consumer groups as disadvantageous to the less well-off. The Gas Consumer Council said at the time that it would be regarded by many as "grossly unfair". The scheme coincided with a 2.9 per cent increase in domestic gas prices, adding about 19p per week to the average household bill.

The new scheme, OptionPay, is likely to help millions of customers who pay bills on time. But the amount is expected to be only about pounds 2 per quarter compared with an average pounds 16 per year for the five million on the direct debit scheme.

OptionPay is part of a phased clampdown by British Gas on people who refuse to pay on time even if they can. It is thought that British Gas has about 3.5 million problem payers, of which about 2.5 million deliberately exploit the system.

The changes in domestic service contracts, also aimed at getting charges into line with costs, could come as a blow to many households when implemented in autumn. They are expected to include adjustments to the Three Star contract, which for a payment of up to pounds 90 currently provides an annual service and free parts and servicing.

A British Gas source said: "In certain cases, it costs more than it's worth. On others, we make money." He added: "We are doing research to see which kind of customers want which kind of product."

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