British Gas scraps standard tariff for new customers

Energy giant British Gas will scrap its expensive standard variable tariffs (SVTs) by April for new customers.

It says this will lower average bills. Similar moves have already been announced by both E.On and Scottish Power.

British Gas said it would also do more to persuade its customers currently on SVTs to move to cheaper deals.

Those already on fixed-term contracts who fail to opt for a replacement will be put on a default tariff.

Earlier this year, draft legislation designed to lower the cost of energy bills was published by the government. The legislation will give energy regulator Ofgem the power to cap default tariffs.

However, British Gas said its announcement was not prompted by the plans for a cap, which is not due to take effect for at least a year.

Announcing the change, Iain Conn, chief executive of British Gas parent firm Centrica, 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."

British Gas has five million customers on an SVT, accounting for some 67% of its customers. These consumers will be allowed to continue on this expensive tariff if they want to.

The company said it had contacted all such customers in the first half of 2017, to try to persuade them to move on to cheaper deals. Despite this, only 10% had moved to a better tariff. Such customers will now be prompted to move twice a year, British Gas said.

However, no one switching to British Gas from another supplier after 1 April will be able to take out an SVT.

If you are on fixed-price contract with British Gas, you will be offered a choice of similar offers when your deal expires.

If you fail to make a choice, you will be put onto a default contract for 12 months.

However, British Gas has not said whether the default contract will be any cheaper than an SVT. Indeed it could even be a variable contract.

Some comparison websites questioned the detail, or lack of it, in what British Gas was proposing.

Richard Neudegg, head of regulation at Uswitch.com, said: "These initiatives by British Gas have the potential to effect positive change for its customers, if it makes it easier for them to make choices about their energy.

"However, 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."

In other words until we know the details of these tariffs there are no guarantees that prices will go down.

According to Ofgem, British Gas already has one of the lowest SVTs in the industry, with a relatively small difference between that and its average fixed-price deal.

British Gas also wants to see additional charges for social and environmental policies taken off energy bills.

These include things like the Warm Home Discount and the Energy Company Obligation.

According to a recent report by energy expert Professor Dieter Helm, such charges account for 20% of the average energy bill.

"We need a fairer way to pay for the changing energy system by removing government policy costs from energy bills," said Mr Conn.

He would like the costs paid for out of general taxation - an idea unlikely to appeal to the government.