Scottish Gas to scrap its standard tariff for customers
● Consumers who come off fixed- rate deals previously faced high charges
Scottish Gas parent company Centrica has become the latest Big Six provider to scrap its standard variable tariff ( SVT) – before government intervention in the market takes effect.
The SVT tariff is usually the most expensive basic rate, which customers previously would automatically be switched on to when they finish a fixed- price deal, if they do not find an alternative. Instead, the firm said it would introduce a new fixed-term default tariff for customers who do not shop around for the best deal once their contract finishes.
Meanwhile, Cent rica also vowed to introduce simpler bills for customers, providing them with a range of competitive fixed- term tariffs, with no exit fees pinned to the default – or emergency – tariff.
It will also encourage S VT customers to switch by targeting them with better deals.
Around 4.5 million of Centrica’s 8.3 million customers – or about 60 percent–are currently on SVTs, with 70 per cent of profits coming from the company’s SVT customer base.
E. On led the way, becoming the first of the major electricity and gas suppliers to abolish the tariff in September.
Richard Neudegg, head of regulation at us witch. com, said: “These initiatives by British Gas have the potential to effect positive change for its customers, if it makes it easier for them to make choices about their energy. However, what remains to be seen is if customers rolled onto a new fixed deal with British Gas end up finding themselves on another poor value standard tariff by another name.”
Iain Conn, group chief executive of Centrica, insisted the reforms were not prompted by the government’s threat to cap energy prices.
In October, the government unveiled a draft bill which would see the energy bills of 11 million households capped for as long as five years.
He said: “We fully recognise that the energy market can and should be improved, but further price controls will only set this back. We believe more action is needed and are ready to play a leading role. Today we have set out the unilateral actions we will take to improve the UK energy market for our customers. This s t ar t s with the withdrawal of the standard variable tariff which contributes to lower levels of customer engagement.”
He added: “Politicians, regulators and energy companies acting together can do better than simply imposing a temporary cap or freezing household energy bills. Working in par tnership, we can create a fairer, more competitive energ y market for the long- term. We ask that the Government and Ofgem engage with us and other members of the industry to evaluate these proposals in the period up to March 2018.”
A spokesman for the Department for Business, Energy and Industrial Strategy said: “Centrica’s decision to put an end to poor value tariffs is an encouraging first step in helping to create a fairer energy market.
“We will not rest until we see the £ 1. 4 billion consumer detriment identified by the Competition and Markets Authority addressed – which is exactly why we published draft legislation to cap tariffs last month.”