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E.ON to scrap its pricey default tariff…but there’s a catch

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Written by: Paloma Kubiak
22/09/2017
E.ON is to axe its expensive standard variable tariff, replacing it with a fixed term tariff - as long as customers have a smart meter installed.

The energy giant said from early 2018, its standard variable tariff will no longer be the default option for customers coming to the end of a fixed price deal.

Instead, they’ll be automatically enrolled onto a one-year fixed tariff and like an SVR tariff (customers will actively have to opt out of the new default fixed deal), there won’t be any exit fees to switch away.

However, while E.ON said the fixed deal offering would be cheaper than its SVR, it couldn’t say at this stage by how much as it’s ironing out the details of this new offering in the coming months.

This move applies to any customers already with a smart meter who may be coming to the end of their fixed deal next year, as well as classic meter (not smart meter) customers who opt for a smart meter. E.ON confirmed this won’t apply to pre-payment (pay-as-you-go) customers as they’re already covered by the energy regulator’s price cap.

‘Standard variable tariffs have had their day’

Michael Lewis, chief executive of E.ON UK, said: “We believe standard variable tariffs have had their day. Tomorrow is about helping customers engage with the market with tariffs that work for them. We want to take action now to make that happen for our customers and we’ll work with Ofgem and BEIS over the coming months to make this a reality.

“For us, smart meters are a key means to achieve this move because they represent a natural opportunity for engagement with our customers and the new technology opens up a world of more accurate billing and greater choice. We’ll be ramping up our activity next year so we’re able to start taking thousands of people off standard variable tariff each week – added to which, their smart future will begin with a price drop.”

E.ON said it has installed around a million smart meters so far and it’s committed to offer every customers one by 2020. Existing E.ON customers can register for a smart meter installation here.

Exchanging one poor value product for another?

Peter Earl, head of energy at comparethemarket.com, said SVTs are almost always very poor value, often costing hundreds of pounds a year more than the best fixed tariff deals on the market so any move to rid the market of them 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 they can keep people on uncompetitive fixed tariffs rather than uncompetitive standard variable ones. They could just be exchanging one poor value product for another.”

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