Scottish Power to act on controversial default energy tariffs
Utility plans to move households on to fixed-price deals when contracts expire
One of Britain’s six biggest utility companies has promised to tackle the expensive default energy tariffs that are in the sights of prime minister Theresa May by moving customers on to cheaper fixed-price deals when their current contracts expire.
The commitment, from ScottishPower, comes as energy companies await a draft bill this week aimed at capping energy prices for millions of households on default energy deals, known as “standard variable tariffs” (SVTs). These tariffs have become a political football as they are generally more expensive than fixed deals and can be raised unexpectedly.
Neil Clitheroe, global retail director at ScottishPower, said his company planned to move all customers off default rates. Customers whose fixed-price energy deals expire next year will not automatically be moved on to an expensive SVT. Instead “we will default them on to new fixed-priced products”, he said.
An announcement by Mrs May at the Conservative party conference last week that she would legislate for a price cap sent shares in Centrica, Britain’s biggest domestic energy supplier, to a 14-year low.
It resurrected speculation among analysts that the owner of British Gas may have to cut its dividend, although Iain Conn, chief executive of Centrica, insisted in May that the company had other “levers” to pull, such as cost-cutting, to mitigate the impact of a price cap.
Several of the biggest energy providers pleaded with the Tories last week not to press ahead with a cap — which will help a further 12m households — and to allow more time to implement other measures to improve the market.
The large utilities argue a cap will reduce customer choice as most companies will set their prices at, or near, the level of limit set by Ofgem, the regulator. A cap may also dissuade households from switching to better deals, they argue.
Centrica has also said it is open to a “market-wide ban” on SVTs in favour of a model where customers have to renew their energy deals in the same way as with home insurance.
Dermot Nolan, head of Ofgem, is due to meet business secretary Greg Clark early this week to discuss implementation of a price cap. Ofgem had been preparing to publish a consultation on price protections for only 2.2m “vulnerable” customers before the draft bill was announced. Energy groups still expect the regulator to press ahead with these measures if it takes time to push legislation through Parliament.
John Penrose, the Tory backbench MP who has been leading a campaign to crack down on SVTs, stressed that a price cap should last for only “2-3 years” until other reforms to help consumers are pushed through.