Eon SVT scrappage will not help vulnerable customers, says Whitehead

"Step in the right direction" will not bring an end to problematic default deals, claims shadow energy minister

Eon’s plan to scrap standard variable tariffs for smart meter customers does not spell the death knell of the controversial default deals, and will not help vulnerable customers, Labour’s energy spokesman has said.

Alan Whitehead, speaking at a fringe meeting yesterday at the Labour party conference, gave a guarded welcome to the German owned utility’s announcement that it will no longer rollover smart meter customers onto its SVT. Instead, the firm proposes to move customers onto a new fixed, one year tariff instead when their current deals run out.

The Southampton MP told the meeting, which was organised by Energy UK, that Eon’s proposal was a “step forward”.

But he added that it was “by no means the end of SVTs” and was no solution for vulnerable customers struggling to pay their electricity bills.

Whitehead added that the “stand-off” between the government and Ofgem over whether the latter had the powers to introduce a market-wide price cap on SVTs meant that “there isn’t going to be a price cap in the near future”.

Whitehead added that while Labour was committed to capping energy bills at £1,000, such a move would be temporary while a wider-ranging reform of the energy market was instigated. He said: “Just having a price cap doesn’t get you very far.”

Lawrence Slade, chief executive of Energy UK, also told the meeting that Eon’s proposal was a “step in the right direction”. He added that other energy companies were taking alternative approaches to dealing with the problems SVTs pose, including disengagmeent and customer paying more than they could for their energy.

Slade also urged the government to suspend the roll out of its universal credit, which is designed to replace a current plethora of benefits payments for needy consumers with a single payment for low income households.

He said that problems with the implementation of the benefit meant that the Department for Work and Pensions should not press ahead with its plans to increase the roll out of the new benefit from five to 50 job centres per month from October.

“If the government doesn’t pause and fix these problems, it’s going to cause real problems for these households and companies,” he said, adding that  shortfalls in benefits payments following the introduction of universal credit had contributed to low income households falling into arrears on their gas and electricity payments.

Ofgem said that it was due to publish proposals for a lower tariff for low income customers who do not use pre-payment meters by the end of this month but has said a wider cap would require an explicit direction from the government.