Author Lauren Howells
British Gas has announced that it will scrap its Standard Variable Tariff for new customers and replace it with a 12-month fixed-term tariff with no exit fees.
The energy provider is the third of the big six suppliers to announce the end of its standard variable tariff, following Scottish Power and E.on.
“Vital to encourage customers to shop around”
In an announcement earlier this week, the company said that the move was “vital to encourage customers to shop around for the best deal and make informed choices about energy”.
British Gas says that customers will be offered a choice of at least two “competitive” fixed-term tariffs at the end of their contract, in order to minimise the number of people who go onto a default tariff. The fixed-term default tariff for those customers who don’t make an “active choice” when their tariff ends, will be time limited to 12 months and have no exit fees.
It has also promised to contact all those customers already on the standard variable tariffs, twice a year, to offer them “better deals”.
Remains to be seen if customers end up finding themselves on another “poor value” standard tariff by another name
In response to the proposals by British Gas, Richard Neudegg, Head of Regulation at uSwitch.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.”
Last month, the government published its draft legislation designed to place a temporary cap on energy bills. The draft bill included measures to limit the cost of standard variable tariffs and other default tariffs that customers are moved onto when their fixed-term deal comes to an end.
“Poor value default tariffs…have no place in a modern energy market”
Citizens Advice Chief Executive, Gillian Guy said: “Poor value default tariffs that take advantage of customer loyalty have no place in a modern energy market.
“Centrica’s reforms are a welcome step in the right direction, but the company needs to make it clear how these changes will really make a difference to the millions of customers who have stayed on their high priced standard variable tariff for years.
“It’s good news that energy companies are taking the initiative by scrapping these expensive tariffs, but we believe consumers still need additional protections. Ofgem is rightly planning to limit energy bills for vulnerable people, while government’s proposed legislation to cap all energy prices provides a welcome opportunity to make the market work better for the 12 million people on rip-off default tariffs.”