Responding to the Conservatives’ pledge to cap prices for energy tariffs, Scottish Power has suggested scrapping standard variable deals altogether.
Scottish Power’s chief corporate office, Keith Anderson, argued against the price cap. Instead, he proposed replacing the standard variable tariff with plan that should be renewed annually, like car insurance policies.
The regular engagement with market that this would encourage should help customers ensure that they are always getting the best deals possible, he argued.
“Just as you insure your car every year and go to the market for the best deal for you, so every energy customer should engage with the market at least once a year to make sure they are on the best deal for them,” he said.
The idea of providing customers with an annual call to switch has been fairly positively received, as is anything that increases customer engagement, but issues have been raised.
On the one hand, there is a concern that the deals customers switch to at the end of each year won’t necessarily be any better than the standard variable tariffs many end up on now. Citizens Advice argued that any attempt to scrap and replace the standard variable tariff is likely to be little more than an exercise in rebranding.
Gillian Guy, chief executive of the charity, said: “Setting targets to get loyal customers on to cheaper fixed deals would be a helpful step for suppliers to take. But questions remain about what happens to customers’ bills when those deals end.
“Just abolishing the standard variable tariff could end up with it being recreated in all but name as the more expensive tariff that people are automatically rolled on to at the end of their fixed term.”
Indeed, it seems that any effort to actually make sure that the deals customers are encouraged to switch to are better than current standard tariffs would simply involve the kind of regulation that the whole idea was intended to side step.
There is also the fact that regular calls to action won’t necessarily increase engagement at all. The benefits of switching energy providers regularly receives a lot of publicity, and so there is no guarantee that one extra notification a year would be the silver bullet that drastically increases customers engagement.
Theresa May’s plan to cap energy bills has received an onslaught of criticism from major energy suppliers, some of whom saw share prices dip shortly after the initial announcement was made. Energy UK, a group that represents most of the UK’s energy suppliers, said: “Further price regulation at this moment would create huge uncertainty around future government intentions, potentially putting at risk the billions in investment and jobs needed to renew our energy system.”
They echoed complaints made by the heads of various providers, saying that a cap would reduce investment in the energy industry, which would harm competition, ultimately working to the detriment of the consumer.
The group’s chief executive, Lawrence Slade, said: “What the industry overall needs is a period of certainty so we know what the policy objectives are, what the targets are, the framework is – so we can work together with the investment community to deliver the low-carbon economy that we need.
“Ill-considered or poorly constructed regulation risks removing the competitive impetus that has driven the huge benefits seen in the market we have today, including an increasing number of suppliers offering a range of innovative products.”