British Gas owner Centrica is scrapping standard variable tariffs for new customers

Rebecca Smith
The British Gas owner is looking to move all its customers away from SVTs
The British Gas owner is looking to move all its customers away from SVTs (Source: Getty)

British Gas owner Centrica has announced it is ditching the standard variable tariff (SVT) for new customers by April, amid a range of measures it says will help reform the energy market more than the introduction of price caps.

The firm, which has around five million customers on these tariffs, said it will also encourage customers to move away from the SVT, and will contact all of its customers at least twice a year. "We are keen to move all our customers off the SVT," Centrica said in an announcement this morning.

Some 10 per cent of British Gas SVT customers switched away from the tariff in the first half of the year. From now on, customers will be offered a choice of fixed term competitive tariffs instead of the SVT.

The move to ditch the tariff comes amid efforts to fend off the government's plans for price caps. In October, Theresa May said she would implement controls to end "rip-off energy prices".

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Iain Conn, group chief executive, Centrica said:

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.

The firm has also called on regulator Ofgem, the government and the sector as a whole to work together, saying the industry "can do better" than imposing a temporary cap or freezing household energy bills.

Conn said: "We have long advocated that the end of the standard variable tariff is the best way to encourage customers to shop around for the best energy deal. But we also need a fairer way to pay for the changing energy system by removing government policy costs from energy bills. This will be fairer for everyone and especially those who struggle most with their bills."

Centrica said the proposals should be evaluated in the period up to March 2018.

The firm set out seven actions today, all of which it said would be implemented by 31 March next year.

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.

A spokesperson for the Department for Business, Energy and Industrial Strategy, said:

Centrica’s decision to put an end to poor value tariffs is an encouraging first step in helping to create a fairer energy market.

We will not rest until we see the £1.4bn consumer detriment identified by the Competition and Markets Authority addressed – which is exactly why we published draft legislation to cap tariffs last month.

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