Scrap the standard tariff, says First Utility

Independent energy supplier First Utility has called for standard variable tariffs to be scrapped as part of a drive to encourage more consumer engagement with the retail energy sector.

The gaping price discrepancy between the price paid by ‘sticky’ customers who remain on more expensive standard deals and the minority who switch to a better deal is believed to be between £235-250 per year, raising concerns within the Competition and Markets Authority that the market is not competitive.

Speaking to Utility Week the supplier’s chief executive Ian McCaig said that even though higher levels of tariff switching are beginning to take place, the market is still “not working”.

“Speaking in broad terms we know that around 30 per cent of consumers are reasonably active in the market, a further 30 per cent switch tariff once in a while, and 40 per cent have never switched at all. But still 70 per cent of consumers are on the wrong tariff,” McCaig said.

“I don’t think we should be content with that,” he said.

According to the new entrant, suppliers should scrap the standard tariffs in favour of a rolling ‘out of contract’ deal which is reviewed against moves in the wholesale market every three months. In addition, energy companies should inform their customers of the cheapest deal, even if it is offered by a rival supplier, on a monthly basis, McCaig said.

And these measures would not be unheard of, he said. McCaig referenced the UK’s supermarket price wars and the mortgage market as examples of competitive sector with transparent pricing models.

“First Utility believes that the industry needs to change from within and do more to inform and support customers to help them make informed choices about the best tariff,” McCaig said.