Ofgem has granted British Gas a temporary derogation from aspects of its gas and electricity supply licences to allow it to leave customers on a “dead” standard variable tariff (SVT).
The decision means for a limited period the supplier can stop customers from moving onto its SVT without ending it for those who are already signed up.
The derogation, announced today (6 April), came into effect from 31 March and will remain in force until 30 June 2019, unless revoked or altered by the regulator.
In November last year, British Gas owner Centrica revealed plans to end the supplier’s SVT in a bid to increase consumer engagement.
Speaking to reporters at the time, Centrica chief executive Iain Conn said beginning in April customers who did not select one of its other deals when their existing contract finished would instead be moved onto a new 12-month fixed-price default tariff.
To motivate customers to actively choose the best available tariff for their needs, Conn said the new default tariff would be priced to be “unattractive but not punitive”.
According to Ofgem’s decision document, British Gas has not committed to unilaterally moving SVT customers onto the new default tariff but will push them to do so, contacting them at least twice a year to encourage them to switch voluntarily.
The company has also indicated it will publish the number of customers on the old and new default tariffs twice a year alongside its financial results to provide transparency over the progress of the scheme to scrap its SVT.
Under an existing exemption within the supply licence, British Gas will have 49 days to switch customers still on the “dead” SVT tariff onto a “live evergreen” tariff once the derogation ends.
In a blog published on Centrica’s website over the weekend, its managing director for UK Home, Sarwjit Sambhi, wrote: “We’ve long argued that energy contracts without an end date are one of the main problems with the market – you wouldn’t expect your car insurance policy to last forever.
“We firmly believe if everyone ended SVTs then the entire market would be even more competitive than it is today.”
“Our Temporary Tariff, a new 12-month fixed-term default tariff with no exit fees, will be available only if a customer doesn’t make an active choice at the end of their contract,” he added. “Our Temporary Tariff will be £25 cheaper than the SVT.”
Sambhi said British Gas is now contacting all customers currently on its SVT “almost once a month” to offer them alternatives.
He continued: “In 2017, when we contacted all five million customers on our SVT, over 500,000 switched to another tariff. We’re expecting an additional 1.3 million customers to choose another tariff by the end of 2018 and ultimately, we want everyone remaining on our SVT to do the same.”
In September last year, Eon became the first big six supplier to announce it was axing its SVT tariff and was followed a month later by Scottish Power. However, Cooperative Energy was the first big name supplier to actually end its SVT, introducing the change in February.
Starting at the beginning of March, Npower has also been moving customers on its Online Price Fix February 2018 tariff (an expiring one-year contract) onto a new 18-month fixed-price deal instead of its SVT.