E.on to ditch default standard variable tariff in favour of one-year fix

Published by Helen Knapman on 22 September 2017.
Last updated on 22 September 2017

E.on has announced that from “early 2018”, the default tariff households are rolled onto when their fixed deal comes to an end – unless they choose otherwise – will be a one-year fix instead of a pricey standard variable tariff (SVT).

Michael Lewis, chief executive of E.on UK says he believes “standard variable tariffs have had their day” and adds that he wants to help “customers engage with the market with tariffs that work for them”.

The one-year fix won’t have an early exit fee, meaning customers will still be able to switch tariff or supplier penalty free at any time.

But while this sounds positive in practice, the success of the default tariff ultimately hinges on the price of the new one-year fix – something that E.on is yet to determine.

Customers of E.on will also still have the option to stick with their pricey SVR if they want to.

Peter Earl, head of energy at comparison website Comparethemarket, comments: “At last - one of the Big Six succumbs to prolonged public pressure. SVTs are almost always very poor value, often costing hundreds of pounds a year more than the best fixed tariff deals on the market. Any move to rid the market of SVTs must be a good outcome for consumers.

“In reality though, this is little more than a fig leaf and not much will really change. It is simply a new and innovative way of encouraging inertia from its customer base. If customers don’t think they need to switch then the energy company wins, because it can keep people on uncompetitive fixed tariffs rather than uncompetitive standard variable ones. It could just be exchanging one poor value product for another.”

How are E.on’s current tariffs priced?

As an illustration, E.on’s current SVT costs an average dual fuel user paying by direct debit £1,144 a year. Its average one year fix meanwhile, costs £1,110 a year or £920 a year if you go for its online-only deal where you must get paperless bills and you can’t pay by cheque. Based on these figures, moving to a one-year fix instead of the SVR could save customers between £34 and £224 a year.

Of course, you should always use a price comparison website to check for the cheapest deal, as the best tariff for you won’t necessarily be the cheapest one offered by your existing supplier.

The cheapest tariff on the market at present, for example, costs £827 a year for an average dual fuel user paying by direct debit, according to price comparison website uSwitch. That equates to a £317 saving compared to E.on’s standard tariff - although this is also a variable deal.

The cheapest fixed deal is a one-year fix costing £834, according to uSwitch – a £280 saving on E.on’s SVR.  

I’m an E.on customer. What does this mean for me

Here’s what E.on’s plan effectively means for customers – although the details haven’t been finalised at this stage:

  • I’m on a standard variable tariff and I don’t have a smart meter: E.on plans to get in touch with households over the next two years to offer them a smart meter, at which point it will also discuss tariffs. If customers don’t choose to switch to a different E.on tariff, they’ll be moved to its new one-year fix. But customers who actively choose to keep their standard tariff can do so.
  • I’m on a standard variable tariff and I have a smart meter: E.on plans to get in touch with households to discuss tariffs. If customers don’t choose to switch to a different E.on tariff, they’ll be moved to its new one-year fix. Customers who actively choose to keep their standard tariff can do so.
  • I’m on a fixed tariff and I don’t have a smart meter: When your fixed deal ends, E.on plans to roll you onto E.on’s new one-year fix instead of its SVT. E.on will also get in touch to offer households a smart meter.
  • I’m on a fixed tariff and I have a smart meter: When your fixed deal ends, E.on plans to roll you onto its new one-year fix instead of its SVT – unless you choose otherwise.  

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