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Centrica, the owner of British Gas, is the latest big energy supplier to pledge to end controversial “standard variable tariffs”, the expensive electricity and gas products that ministers are targeting through a proposed price cap.
Around 60 per cent of UK households are on standard variable tariffs, which tend to be more expensive than fixed price deals. The government is hoping to protect consumers on this rate via a price cap and last month published a draft bill, although analysts don’t expect legislation to come into force until 2019.
Centrica said on Monday that it would withdraw the standard variable tariff and instead introduce a 12 month “emergency” default tariff for those customers who do not engage with the market and choose the best deal. This tariff will not have exit fees so households can switch at any time, Centrica said.
It also pledged to try and move all of its customers off standard tariffs, echoing similar promises from other “big six” suppliers such as ScottishPower.
Centrica’s chief executive Iain Conn has also called for so-called “green taxes” to be removed from energy bills and paid for via a different mechanism, such as general taxation. These taxes include subsidies to fund renewable power generation and programmes such as the £11bn roll-out of smart meters, which are designed to help customers keep better track of their energy usage. They are currently levied via household energy bills and many of the largest suppliers cite them as one of the biggest reasons for rising bills this year – although this claim has been disputed by the government.
Centrica has also asked that all companies competing in the retail energy market – around 60 suppliers now offer electricity or gas to homes according to Ofgem – be forced to pay towards social policies such as the “warm home discount”, which reduces bills for vulnerable households over winter.
The smallest suppliers are exempt from such policies, allowing them to undercut the biggest energy companies.
Centrica’s chief executive Iain Conn 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.
We also believe that further measures by Ofgem and the Government are required so that together we can create a market that works for everyone, where there is improved transparency and a fairer allocation of costs currently included in the energy bill.