Has British Gas conjured up a magic solution to energy bills? Probably not

21st November 2017 | Residential Energy

It’s amazing what can happen when the government threatens to impose a price cap on energy bills. Suddenly the big six suppliers, who have spent the three decades since privatisation wedded to their poor-value standard variable tariffs, or SVTs, become a whirr of activity. Centrica, parent of British Gas, is the third to declare it will abolish SVTs.

Iain Conn, the Centrica chief executive, says the timing is unrelated to the government’s threat to SVTs, a claim that will convince almost nobody. This looks like an 11th-hour bid to persuade ministers to change their mind.

OK, it’s true, as Conn says, that Centrica has been muttering about the wisdom of getting rid of SVTs for 18 months. But, come on, this new thinking still postdates Ed Miliband’s price-cap proposals, first aired in 2013. All the while, British Gas has argued that its SVT represents good value and is preferred by some customers.

British Gas

Still, if the new approach is a serious attempt to ween customers off SVTs, and persuade them to choose a tariff actively, that’s clearly to be welcomed. But there’s an obvious problem. Energy supply is not like home insurance.

Companies have an obligation to supply and can’t simply switch off customers who are too lazy, or too baffled, to shop around. Those determinedly inactive punters still have to be charged something, and British Gas’s new emergency default tariff looks suspiciously like another SVT, just dressed in different clothes.

Conn rejects the charge of making cosmetic tweaks, but it’s hard to understand why the government should take him on trust. Ministers would look ridiculous if they are lobbied into dropping price caps but the new default tariffs turn out to be just as poor value as the current SVTs.

You can’t blame Conn for trying new tactics, of course. Centrica’s share price has more than halved since Miliband changed the debate over energy bills. There is no penalty for throwing the dice one last time. Conn is probably also correct that price caps risk making a bad position worse.

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