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The end of standard tariffs?

British Gas

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

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?

Comments

If companies are now starting to do away with SVTs, I guess we are seeing the first “unintended consequence” of complaining about the plight of consumers “unable to move from SVTs”.

I used to have my gas and electric supplied by British Gas through pre-pay meters. I was surprised how much cheaper other suppliers were. I changed my supplier. I’ve recently had a refund with a message stating that their charges have been cut. I think British Gas would have to do more in order to keep customers happy.

I was with British Gas (BG) on a standard tariff and my combined power bills were £1,200.
Last year, replaced all our lightbulbs with LED versions and I switched to British Gas on a 1 year fixed contract via Money Saving Expert (MSE) and the cost was £800! (from the same supplier).
When the fixed term expired in October 2017, I switched again and MSE say I will save over £300 on the BG standard tariff.

I am a British Gas customer with their pre-payment meters now on the smart meter system, which saves me bending down to credit the meters. Pre-payment customers have always been the highest charged customers, and there is no reason for this to continue, now they no longer need shillings or the plastic keys, then the overhead maintenance is lower. It must always be remembered that these meter have to have the money put onto them before they can supply the gas or electric, there by saving money and giving user the ability to control their usage and keep the bills under control.
I have been a prepayment customer in this house and my 2 previous, control is vital.
The changing of the tariff system, now has to incorporate lower rates for the prepayment users, the bother of changing suppliers is not something I want to go through again, after the mess I had when I changed from BG to Manweb (Scottish Power), and they did not work quick enough, so said I owed them money, which with meters that needed topping up, then they were told to speak with Bg to get the money they wanted, they had not changed the cards, so I still had to use the BG one,,so I have stayed away from swapping suppliers, cannot do with all the palaver.
As for the comments about Nationalizing the the supply industry, British Gas was the national supplier of all gas for domestic, commercial and industrial supply,,Margret Thatcher privatised the industry back in 1986? and everybody wanted the shares and become dividend receivers,,and from then on the prices started rising and the swop to get a better deal began,, I remember well all the mess that followed,,companies paying the gas bill to BG when belonged to another supplier,,, and all the domestic customers getting bonus vouchers and paying them onto their gas accounts what a pile more work they made,,,I worked at British Gas North Western in Altrincham, P.O.B 39,,for 19 years. The gas industry should not have been privatised,,to pay dividends means higher prices,,
Half the tariff, lower the charges and give people a better level of control,,not heat or eat,,,
and if the £200 money is not wanted,,then give it to somebody with prepayment meters so they can use the money to theirs up. Although I am 61 I do not get the £200 paid to me, just the WArm Home Discount paid sometime next year and that is only for the electric, and nothing for the gas,,so lights on and don’t have a wash or wash up,,go that..

Ramesh Kapoor says:
21 November 2017

It is easy to say,, change your suppliers,when you do,its all we!l for the first year.After that you are sucked into the usual price with no benefits. One supplier put the charges up,a week or so later the put the price up too.so what is benefit in changing .

I’m 72 years old and vaguely remember that standard charges were dropped many years ago but were reintroduced without any consultation and by the back door. I remember being very surprised when I found standard charges once again on my energy bills. By the way I totally agree with Ramesh that’s why so many of us don’t change suppliers. Also I notice regular customers aren’t getting standard charges dropped and if like me you pay your bills as they come in and not by direct debit you don’t even come into the equation, just like the discount British Gas offered direct debit customers only recently

sorry meant standard tariffs

I’v been with British Gas for approx. 48 years. And I’v been on the stanared tariff for as long as I can remember, and I’v been on this meter reading for at least 30 years. And every time I’m contacted them they tell me that I’m on the cheapest tariff and that thier was nothing could be done, my gas central heating I don’t use it we can’t afford it. The part of the gas I use is for Hot water my wife will not use the gas Hob and yet my bills is coming in at £50 plus per month, I pay by direct debit £27.80 every month and then just about 6 weeks ago they put my gas up to £80 per month. Again I phoned them up and informed them that my wife and I are both pensioners and that we couldn’t afford this amount so he put it down to £50 month and that’s what they take out the back each month. My wife cooks on a small two burner electricity camping hob. I hope you can follow my letter and hope you understand it.

This all smells of a conjuring trick, “the quickness of the hand deceives the eye”.

British Gas is not about to make genuine reductions because to do so will cut profits and reduce share dividends. They will claim they have made efficiency savings which is shorthand for shedding staff, but British Gas hasn’t many surplus staff they can shed without seriously damaging the service and if their plans to offer at least a couple of deals to every standard customer every year come to fruition they will need a small army of extra operators if a complete meltdown is to be avoided.
Their plans make no sense at all.

The reality is likely to be, like the Sheriff of Nottingham robbing the poor to give to the rich, British Gas will analyse statistics and give keen prices to the groups likely to complain more and load the prices of the uncomplaining and those who don’t engage with haggling over contracts. Those who will be paying more will be unnoticed for possibly an extended period by Ofgas and then when it is noticed “it will all be an unfortunate oversight”…
British Gas are likely to operate the new contracts as if they are business contracts and offer the lowest prices to the highest consuming customers and force the lowest consuming customers to pay the highest prices.

The unfortunate thing about all that “good sense and fair play” is the lowest consuming customers are most likely to be the people who can least afford to pay higher prices, the people who most need protecting from that brand of good sense and fair play, especially as that group often does not qualify for benefits of any sort. In Britain today there are a lot of genuinely poor people, usually poor through no fault of their own but even poor people need to eat and experience a little warmth.

We should all be concerned about such people and no new regime would be complete without proper safety nets and monitoring to ensure this group is protected from the machinations of British Gas and other number crunchers.

john amos says:
22 November 2017

” NEW CUSTOMERS” what about the older ones ??????

Michael Bond says:
22 November 2017

No I don’t think this silly move will get people switching more, I am happy with my standard tariff and don’t trust other providers as when I did switch the provider had rubbish customer service which British Gas does brilliantly. What should be done is the energy provided to people on key meters should be reduced in price as it is usually the less well off who need to use them.

Tom Elliott says:
22 November 2017

Any way you look at BG they are a rip-off in every way. They answer questions so as to confuse people. You never get real help. Their policy is (go away and leave us alone) you won’t understand our deliberate reply anyway. Nothing ever makes sense with them. We could do with millions of people to go elsewhere and then these fatcats might think again.

That’s right Tom. There are forty or so energy suppliers out there looking for customers [and, as Bishbut says, trying to lure them in with Amazon vouchers]. So why are so many people sitting down and writing a moaning comment here about BG when they could more usefully spend the same amount of time finding a different company? It is not necessary to find the absolutely cheapest tariff if you are already with one of the majors – anything slightly better will do and that’s not hard to find. Volume switching to another one of the big suppliers with just slightly better tariffs than BG would send a shock wave through the industry. I don’t know what people are afraid of. There very few other products and services people can buy from the comfort of their own home where there is so much information and assistance available and a wide choice of alternatives. Sometimes, notwithstanding the dual-fuel incentives, there could be a benefit in buying gas and electricity from different companies depending on the circumstances. People gripe about the cost of so many lesser things but put up with bad service and high prices for one of the most essential and expensive commodities they require and over which they actually have complete control in a competitive market..

As I posted above John a YouGov poll found ” “Approaching a third (32%) would switch for £100 or less, a quarter (25%) would need to save £101-200 and around one in five (19%) say that they would want to see savings of over £200 a year in order to change supplier. A further 24% either didn’t know (17%) or wouldn’t switch regardless of the benefit (7%).” So I wonder just how concerned they really are, when 74% don’t want to bother to save at least £100 – 10% of an average bill.

We keep seeing energy as an easy target, but other essentials cost us far more – food, council tax and rent for example. The latter two might have subsidies for some groups. Is that what we really want to do with energy?

Yesterday I suggested that “volume switching to another one of the big suppliers with just slightly better tariffs than BG would send a shock wave through the industry“.

Well it’s certainly sent a shock wave through British Gas. It is reported today [BBC News Website > Business] that “British Gas has lost 823,000 domestic customer accounts, nearly 6%, since the end of June. Owner Centrica said 150,000 of those accounts had switched to other providers, some of them because it raised prices in September.The news, unveiled in a warning about poor trading, sent Centrica shares tumbling by 17%“.

Many will just stay with their supplier no matter what. How can we be sure that they won’t be cheaper to start with but in under 12 months be dearer than the SVT?

If you join a fixed price tariff, that is guaranteed for usually, a year minimum. You gamble that prices will not generally fall, but they might. However, most fixed price tariffs seem heavily subsidised by the supplier so it is very unlikely they would be beaten by an SVT.

Davey says:
22 November 2017

There should NOT be loads of tariffs – they sell gas, not 50 different types of gas, so if i buy gas from a company and my neighbour does then we should pay the same price. I don’t know how they get away with it full stop, you don’t go in a supermarket and the price of beans is one price for me and another for someone else. There will never be true competition between energy companies while they are allowed to make up loads of different tariffs. They should only be one price for their gas and one for their electric and a deal if you take out both with the same company then each company would truly be competitive in order to attract your custom.

Keith says:
22 November 2017

When I get home after working all day, the last thing I want to do is waste time / life ‘switching’ every 5 minutes!
It shouldn’t be necessary for loads of people to waste their time constantly changing providers. The government should prevent providers from racketeering and making massive profits; give the regulator the teeth to do the work it should be doing to protect the public!

Keith, if you choose a fixed price deal you only need to look at switching once a year. If the half hour or so it takes saves you £100 or more, it is surely worth the effort?

I am one of the customers on standard rate, as a loyal customer why am I not allowed to benefit. Being an OAP every penny counts.

Shirley Nixon says:
23 November 2017

So why am I one of the loyal British Gas customers? Because I can’t be doing with all the hassle of searching online for a better deal every year. I prefer to pay by quarterly bill, paying for the actual gas that I’ve used and not being stung by an estimated monthly direct debit payment. I’ve had experience in the past with British Gas over payments and I prefer to be in control. I also prefer to have separate fuel bills. All this switching and mucking about doesn’t just affect my energy bills, it’s house insurance, it’s car insurance, it’s online broadband providers. It’s so many other things that quite frankly, I’d rather have that time to enjoy myself! I don’t actually use an awful lot of energy anyway (must be because I don’t spend all my time on my computer) and any savings I might make are minimal. So I’m just happy as I am.

Octopus Energy are really good for both customer service and price. (Only have electricity as we have a oil boiler).

Changing providers takes to much time and shouldn’t be necessity for people to do every year

I am not happy with the increase in costs by british gas to the customer & the scrapping of the annual £15 top up allowance. I think it is greedy & mean of them when some people are struggling every winter.

Have you considered changing supplier? If so, try Which? Switch.