British Gas to ditch pricey standard tariffs

Published by Helen Knapman on 20 November 2017.
Last updated on 20 November 2017

British Gas to ditch pricey standard tariffs

British Gas has become the latest of the Big Six energy providers to announce that it wants to ditch pricey standard variable tariffs (SVTs).

When a fixed gas and/or electricity tariff comes to an end, households are moved onto an SVR, which typically cost £100s more than the cheapest tariff on the market.

E.on announced in September that from “early 2018” the default tariffs households are rolled onto will be a one-year fix.  

But British Gas has followed suit, announcing that by 31 March 2018, SVTs will be withdrawn for new customers who will instead be moved onto a “12-month emergency or default tariff with no exit fees”.

While British Gas says this move is aimed at “increasing customer engagement”, it adds that this new default tariff could still be variable and it’s yet to determine prices.

Richard Neudegg, head of regulation at comparison site uSwitch, comments: “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.”

Ben Wilson from comparison site GoCompare Energy adds: “This is a welcome move for British Gas’s five million customers who, like two thirds of all UK households, are paying much too much for their gas and electricity, thanks to being on innocuously named ‘standard variable rate’ tariffs.

“But it doesn’t come into effect until April – once the peak energy usage season is over – and it’s important that customers realise that this move will not signal the end of bad deals – in effect, British Gas has just replaced its SVR with an SBR or ‘Slightly Better Rate’.”

When it comes to existing customers on SVTs, British Gas says it will contact all its customers at least twice a year to encourage them to move away from the SVT and will offer them at least two alternative deals instead.

British Gas already contacted SVT customers in the first half of 2017, which resulted in 10% switching away from the SVT.

‘More action is needed to improve the market’

Iain Conn, group chief executive at Centrica, says: “We fully recognise that the energy market can and should be improved, but further price controls will only set this back. We believe more action is needed and are ready to play a leading role. Today we have set out the unilateral actions we will take to improve the UK energy market for our customers. This starts with the withdrawal of the Standard Variable Tariff which contributes to lower levels of customer engagement.”

British Gas adds that it will also make other changes by 31 March 2018, which include producing simpler bills and driving customer service improvements. 

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