Centrica to scrap standard tariff to fend off energy price cap
20th November 2017 | Residential Energy
Centrica is to scrap a higher rate tariff for new customers as part of industry efforts to see off price caps threatened by the government and said it had no plans to follow rivals and spin off its retail energy business.
Prime Minister Theresa May said in October she would impose controls to tackle what she called “rip-off energy prices” – home power bills have doubles in Britain over the past decade to an average of about £1,200 a year. The move has piled pressure on Centrica and Britain’s other big energy suppliers, already facing competition from smaller, more nimble rivals able to offer cheaper deals.
After years of losing customers, SSE and Innogy announced plans to merge and list their British retail units in a separate joint venture. Centrica CEO said his company had no plans to follow suit. “We believe we can have an attractive energy business in the UK,” he said on a conference call on Monday.
Centrica, the owner of Britain’s largest energy supplier British Gas, said it would stop offering its standard variable tariff (SVT) – the payment targeted by the government cap. Utilities charge customers SVTs if they do not choose fixed-term deals that are generally cheaper. Regulator Ofgem said SVTs offered by the Big Six suppliers in August were on average almost £320 per year more expensive than their cheapest deals.
Centrica said it would give customers a choice of at least two three-year tariffs at the end of their contract period as part of an attempt to move all customers off SVT deals, but did not commit to making the new tariffs cheaper.
“The default needs to be an unattractive tariff but not a punitive tariff,” Conn said, adding it would need to be higher than other available tariffs to incentivise people to engage in the market and switch deals.
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