British Gas’ parent company Centrica plans to abolish its most common form of tariff – the standard variable tariff – before Government intervention in the market takes effect.
SVTs have come under fire for being a costly alternative if customers do not opt for a specific fixed-term deal.
On Monday, Centrica, which is Britain’s biggest domestic electricity and gas supplier, announced that it intends to phase the tariffs out, as part of a package of actions to reform the UK energy market.
It said it believes the move would deliver a fairer, more competitive and sustainable energy market and that getting rid of SVTs would be significantly more effective than further Government intervention through temporary price controls in the form of caps, for example.
“We fully recognise that the energy market can and should be improved, but further price controls will only set this back,” said Centrica chief executive Iain Conn.
“We believe more action is needed and are ready to play a leading role,” he added.
He said that SVTs contribute to lower levels of customer engagement and that withdrawing them was the best way of encouraging customers to shop around for the best energy deal.
“Politicians, regulators and energy companies acting together can do better than simply imposing a temporary cap or freezing household energy bills,” said Mr Conn.
“Working in partnership, we can create a fairer, more competitive energy market for the long-term.”
Centrica said that it would proactively offer customers a choice of fixed term tariffs – with a duration of up to three years – at the end of their contract.
Customers who do not make an active decision when their tariff ends will be rolled onto a 12-month emergency or default tariff with no exit fees.
It also said that it would introduce “simple no nonsense bills” for all customers and that it would work with regulator Ofgem to secure the permissions necessary to introduce much simpler bills as fast as possible, “which will help them to make the right choice about their energy tariff”.
All actions will all be implemented no later than the end of March next year.
