British gas has announced they will be scrapping their standard variable tariffs (SVTs) in a move they claim will lower the average bill for their customers, most of whom are on standard tariffs.
The SVTs have previously come under fire for being an expensive option for those who do not choose a fixed term deal, or for those who’s fixed rate deal has come to an end.
The price of energy across the UK has soared over the last decade, with average annual bills on a standard tariff now reaching close to £1,200. The regulatory body Ofgem has said that SVT’s offered by the six largest energy companies in the UK were on average £300 more expensive in the month of August than the cheapest options available.
“We fully recognise that the energy market can and should be improved, but further price controls will only set this back,” said Iain Conn, chief executive of Centrica, the company that owns British.
“We believe more action is needed and are ready to play a leading role,” he added.
Centrica have said they stop SVTs from the 31st of March and will instead be offering all customers a minimum of two, three-year fixed tariffs as an alternative. “This will result in a broader range of better deals with fewer people on default tariffs,” Centrica said. “And if standard variable tariffs could be ended completely then the effects would be market-wide.”
The energy giant has also come forward and said they will start the introduction of “simple no-nonsense bills” for all customers and that it will work alongside Ofgem to introduce the changes as quickly as possible.
Energy Expert Stephen Murray welcomed the end of SVTs, saying that it highlights industry change. He said that it “is much more effective than a one size fits all price cap, which could have unintended consequences such as many of best deals disappearing, prices finding a higher level and a growing market of disengaged customers”.
However, not everyone was as complimentary about the new changes. Martin Lewis, who is founder of Money Saving Expert.com said “British Gas is promoting this as a radical pro-consumer move. Yet in truth this could just be smoke and mirrors. Instead of a default standard variable tariff people move to when the deal they chose ends, it will now have a default standard fixed term tariff. Yet that could mean anything at any price”
“For example, in the past British Gas fixed-rate deals have often been set at the same price as its standard rate. If it rolled people onto one of those, that would mean no saving at all, except it would forestall a price hike for the short term.”
Conservative MP John Penrose, mirrored the thoughts of Martin Lewis, claiming that new moved by British Gas were no more than “cosmetic renaming of rip-off default tariffs”.
“This is just British Gas promising to try a bit harder to persuade customers to switch. But it isn’t enforceable, and they aren’t promising to switch customers onto deals which are competitive either,” he said.
“So there’s no guarantee how many of the 17 million households that are being ripped off will be helped, or that these new tariffs won’t gradually turn into the same old rip-off over time, with a different label on the tin.”
The government has implemented legislation to cap energy costs of 11m homes for up to five years, they claim this could be saving households up to £100 per year. The new measure will apply to anyone on a standard variable tariff but will not be coming into effect until 2019 at the earliest. British Gas however have said that the move to change from standard variable tariffs was not prompted by government legislation.
