British Gas owner Centrica to scrap standard variable tariffs

Centrica (LON:CNA) will scrap its controversial standard variable tariff (SVT) for new customers from April.

The British Gas owner also announced plans to introduce simpler bills and a new fixed-term default tariff for customers who do not shop around for a cheaper deal once their contract ends.

The promise came following Theresa May’s vow to end “rip-off energy prices” – which will affect those on SVTs but not until 2019. 

The end of SVT’s will lead to result in a broader range of better deals with fewer people on default tariffs,” said the Big Six energy supplier. “And if standard variable tariffs could be ended completely then the effects would be market-wide.”

Centrica will introduce 12-month default tariff with no exit fees. This is a welcome change by Britain’s competition watchdog who found that the company was overcharging UK customers £1.4 billion a year.

With the change set for April next year, other energy companies are also expected to follow suit.

“The writing is on the wall for SVTs,” said Peter Earl, head of energy at comparethemarket.com.

“With three of the big six scrapping them, we expect the others to follow suit. The fact that British Gas is only scrapping SVTs for new customers from April suggests that millions of customers from various suppliers may remain on these tariffs for the foreseeable future. SVTs represent woefully poor value for money and few tears will be shed at their demise.”

Speaking to BBC Radio 4’s Today programme, Centrica’s chief executive Iain Conn said that the reforms were nothing to do with the government’s threat to cap energy prices.

“We have actually been working on these proposals for many months now.

“We have been saying for the last 18 months that we think the best solution for this market is to end evergreen contracts, contracts that don’t have an end date.

“We obviously had to pause when Theresa May announced her intention to cap the market but we have now announced today a comprehensive set of actions to reform the market, starting in our case with the removal of the standard variable tariff.”