British Gas owner Centrica PLC (LON:CAN) is scrapping its standard variable tariff (SVT)– its most popular form of tariff – for new customers as part of a range of measures it says will help reform the energy market more than the introduction of price caps.
Alongside new customers, existing customers will also be contacted and encouraged to move away from the SVT – which has come under fire for being a costly alternative to fixed-term deals.
SVTs tend to be more expensive than fixed deals
Generally there are no exit fees for standard tariffs, although the prices are generally not the cheapest a supplier has, according to the consumer magazine, Which?
Centrica said 10% of British Gas customers switched away from that particular tariff in the first half of this year.
Britain’s biggest domestic electricity and gas supplier announced the plans to phase out SVTs as part of a wider package of actions designed to improve the UK energy market.
It said it believes the move would deliver a fairer, more competitive and more sustainable energy market than what could be achieved by further government intervention.
“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.
Sector 'can do better' than price caps
Conn called on the sector as a whole, along with regulator Ofgem and the government, to work together, saying they “can do better” than just imposing a temporary price cap or freezing bills.
As well as withdrawing the SVT for new customers, Centrica said it will provide new offers "to respond to customers' changing needs", proactively offer customers a choice of fixed term tariffs at the end of their contract, and introduce a new fixed term default tariff.
All actions will be implemented no later than the end of March next year.
Centrica shares were unchanged on Monday morning at 163.2p.