British Gas will soon scrap standard tariffs for new customers – will this be a game-changer for the energy market?
British Gas, the UK’s biggest energy supplier, announced plans today to withdraw its standard variable gas and electricity tariff. The company is the third energy provider to announce the end of its Standard Variable Tariff (SVT) following announcements from Eon and Scottish Power.
British Gas has pledged to end its SVT for new customers by March 2018. Instead, it will replace the SVT with a new fixed-term, 12-month default tariff with no exit fees and customers will be offered at least two new deals when their tariff ends.
The energy company has explained that customers already on SVTs will be contacted twice a year about cheaper deals in an effort to move them onto fixed term deals.
Alongside these changes, British Gas has promised to expand their rewards scheme, make bills simpler, improve its customer service and become more efficient to keep bills down.
British Gas says that these changes will fundamentally change how consumers engage with the energy market. It has highlighted the open-ended SVTs as one of the biggest problems in a market beset with consumer disengagement and a lack of competition for the 58% of consumers who have never switched or done so only once.
A better deal for energy customers?
In November 2016, our Fair Energy Prices campaign challenged energy suppliers to publish plans on how they will help standard tariff customers find better deals. Fourteen suppliers, including British Gas, responded to our campaign earlier this year and since then we’ve been waiting for these plans to be delivered.
The move by British Gas is welcome – but only if it leads to more consumers engaging in the energy market and getting the best deals available.
Reports suggest that British Gas customers will save £75 off its current SVTs with this new online tariff. But at present, we don’t know how much the new default tariff will cost.
British Gas’ cheapest fixed tariff currently available is only £13 less than its standard tariff, for the average user per year. But, at the time of writing, that is still a whopping £271 pricier than the cheapest tariff on the market per year for the average user.
So, how much benefit consumers see will rely on what level the new default tariff will be set at and how effective British Gas’ measures are at getting existing consumers to choose the best deals available. Consumers who want to get the best deals on the market still need to shop around and switch.
What about the energy price cap?
British Gas’ announcement comes in the shadow of the government’s promise to cap energy prices. Last month it published a draft bill and it hopes to introduce a cap on SVTs and default tariffs by winter 2018/19.
Energy companies have pushed hard against the introduction of a cap as they warn it will lead to less choice for consumers, weaker competition and less innovation in the market.
British Gas boss, Iain Conn, said:
‘Price caps don’t work. We think everybody should have a fixed term energy deal instead. It will increase customer engagement, choice and result in better deals.’
British Gas instead wants the government and Ofgem to ban SVTs without end dates, remove social and environmental policy costs from customers’ bills and pay them from general taxation and do more to identify vulnerable customers needing protection.
Your views on energy
So today is big news for British Gas and its customers. We hope that this will see more people switching away from those often poor value standard tariffs. However, we now need to see whether this news does actually lead to people getting a better deal.
What do you think to today’s news from British Gas? Do you think this will get more people on better value tariffs? Would you like other providers to follow suit?