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British Gas latest to scrap pricey default energy tariff

Written by: Paloma Kubiak
British Gas has announced it will axe its expensive standard variable tariff (SVT) for new customers, which will take effect from April.

The energy giant said the move is vital to encourage customers to shop around for the best deal, helping them make informed choices.

From April, new customers will be offered a choice of competitive, fixed-term deals, British Gas said.

It comes after rival E.ON announced it would scrap its default tariff in early 2018, as long as customers opted to have a smart meter installed.

Along with the move to scrap the SVT, British Gas has also committed to deliver on six other areas, no later than the end of March 2018:

  • Contact customers on its SVT twice a year to offer them better deals
  • Offer competitive, fixed-term tariffs at the end of contracts – at least two new tariff choices
  • Introduce a new fixed-term default tariff, limited to 12 months. It won’t have exit fees
  • New offers: online-only tariff and bundles combining energy with boiler servicing or with Hive connected home products
  • “No-nonsense bills” for customers – making them easier for customers to understand
  • Improve customer service and efficiency to keep costs and customer bills down.

British Gas has also set out points for the government and regulator to adopt in order to improve the energy market, including phasing out SVTs altogether, making smart meter roll-out more efficient, and greater consistency in helping vulnerable customers.

Mark Hodges, CEO, of Centrica Consumer, said: “Today we are taking some big steps to transform the UK’s domestic energy market and give customers a fairer, simpler deal and lower bills.

“We have done a lot in the past year. We froze our prices last winter right through until August; we introduced a new scheme to reward our loyal customers; we reached out to five million of our customers to make sure they were aware of the switching choices they could make.

“But we must do more. We recognise that. That’s why today we have published a series of unilateral actions and a package of proposals for radical change.”

‘Reforms are needed to fix the broken energy market’

Peter Earl, head of energy at ComparetheMarket, said: “The writing is on the wall for Standard Variable Tariffs (SVTs).

“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.

“There is a danger, however, that getting rid of the worst deals will lull consumers into a false sense of security. Not being on the worst deal is far from being on the best one – British Gas customers will not automatically find themselves on a competitive tariff.”

Earl added that wider reforms are needed to fix the broken energy market. “A lack of understanding is leading to fear around making a change and with the average saving for consumers on an SVT standing at around £300 a year, the majority of households are still missing out, especially those who continue on SVTs,” he said.

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