When an energy customer comes to the end of their fixed-term contract, the provider moves them onto its standard variable tariff which tends to be more expensive.

This method was to prevent suppliers from locking customers into further contracts thereby making it more difficult or expensive for them to switch to an alternative tariff or supplier.

However, when a customer comes to the end of their fixed deal and they have not made an active decision to move or switch provider, Ofgem has decided to allow suppliers to roll them onto a further fixed-term tariff.

This further fixed tariff must satisfy these conditions:

• There are no penalties for early termination
• It is the same price or cheaper than the variable tariff that the customer would have used
• It is similar to the customer’s current tariff, taking into account their characteristics and preferences (for example, tariff type, online account management, meter type and payment method).

The idea was first proposed by Ofgem in August and a statement of the decision read: “These changes will provide room for suppliers to differentiate themselves and put their customers on better deals at the end of their fixed-term contracts.

“Simultaneously, they will maintain strong protections for fixed-term tariff customers so that they are not locked into poor value or inappropriate tariffs with termination fees. Through today’s licence modifications we ultimately aim to deliver better outcomes and better value deals for customers. In so doing, we expect that the changes will reduce the number of customers on standard variable tariffs.”

However, the changes are voluntary, so providers don’t have to move customers onto another fixed deal. Feedback on the proposal suggested that Ofgem should go further and make this move mandatory, while others suggested standard variable tariffs should be banned all together.

Ofgem’s response read: “We acknowledge that there may be benefits in going further and making this change mandatory rather than optional, or abolishing standard variable tariffs entirely. This could be particularly beneficial if end of fixed term notices and other renewal reminders acted to prompt engagement among those consumers not currently engaged.

“However, we would require further investigation, evidence and analysis to be confident that making our proposals mandatory or banning standard variable tariffs would benefit consumers.”