UK Centrica Attempts to Engage Customers

UK dominant energy retailer is planning to end its standard variable tariff (SVT) as part of a series of measures designed to stimulate market engagement, it said November 20. The nation's biggest household gas supplier, it has committed to a new system of tariffs for new customers with effect from April 1, but told NGW that it has not yet decided on the details. "There is a lot of work to be done," the company said. But customers already on the SVT would be encouraged to consider bundling energy with other options, such as boiler services, possibly on fixed-term contracts that run for three years. The SVT will be gradually phased out for all, it hopes.

It says the measures, in aggregate, will "deliver a fairer allocation of energy policy costs and further protect vulnerable customers." It is also proposing measures to the regulator Ofgem, and government to encourage customer engagement. The Competition and Markets Authority (CMA) decided that customer detachment was the main problem with the retail sector, rather than price fixing by the Big Six, or the vertically-integrated industry structure, as many had believed before it published its report last year.

Theresa May's Conservative government has committed to capping the SVT, the high-priced money-spinner that allows retailers to win new customers with low-priced energy. Centrica said its own "proposals will deliver a fairer, more competitive and sustainable energy market for customers and will be significantly more effective than further government intervention through temporary price controls."

Centrica CEO Iain Conn said it was clear the energy market 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.... 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," he said.

He called on government and Ofgem to "engage with us and other members of the industry to evaluate these proposals in the period up to March 2018." He said energy is a key input to all economic activity, is an important driver of the UK’s productivity and therefore getting energy right is fundamental to the government’s industrial strategy.