Standard variable tariffs: Latest trends at September 2017
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This page gives the latest trends on how poor value default tariffs, particularly ‘standard variable’ tariffs (SVTs), compare across the 10 largest suppliers in the market. It shows the number of non-prepayment (non-PPM) customer accounts that have remained on SVTs since our April 2017 update. It also shows how the average prices paid by a household on an SVT compare with the cheapest tariffs available from their supplier and those available across the market.
League table: latest trends in ‘standard variable’ tariffs (September 2017 data)
Prepayment meter (PPM) accounts are excluded from this data. This is because the price a supplier can charge a PPM customer is capped until 2020 under a Safeguard Tariff. PPM customers also have a limited tariff choice available to them, which means that they cannot access many of the cheapest deals in the market.
Source: Pricing information sourced from Energyhelpline. Customer accounts information based on Ofgem data received from suppliers.
Are the number of ‘standard variable’ tariff customers falling?
The majority of customers are still on poor value SVTs with their energy supplier. As of September 2017, around 57% of people with the 10 largest suppliers – around 13 million customers – are on non price-protected SVTs. This shows an overall reduction of 2 percentage points since our April update.
Overall, the number of customer accounts on SVTs is slowly reducing. There may be a variety of reasons for this, including record switching rates in 2017 and efforts by some suppliers to get their customers onto a better deal.
There are substantial differences between suppliers in the proportion of non-price protected SVT customer accounts held:
- The three largest suppliers in the domestic gas and electricity markets – SSE, British Gas and E.ON – have the highest, respectively 71%, 67% and 61%.
- Four suppliers show intermediate values, around the 40-50% range.
- Only three suppliers have around or below 35%.
Since April 2017, new rules from Ofgem mean suppliers must help their customers make informed choices about the best tariff for them. However, the evidence so far shows many suppliers could do more to get all their customers a better deal, particularly those on poor value SVTs.
The table above suggests that reductions in the number of customer accounts on an SVT since April have been relatively small, ranging between 3 and 9%.
What is the current price charged to a ‘standard variable’ tariff customer?
In a well-functioning retail market, there should be downward pressure on prices as suppliers compete aggressively to attract and keep customers. However an average of the ten suppliers’ SVT tariffs are around £300 or more above the cheapest overall tariff on the market (£806) and the cheapest variable tariff (£827) available on the market in the analysed period. This difference has persisted since the Competition and Markets Authority investigated the energy market in 2015.
While most SVTs offer poor value compared to suppliers’ cheapest deals, they also offer poor value on a standalone basis. Albeit to differing degrees, all suppliers’ SVT tariffs for direct debit customers are more expensive than the current level of Ofgem’s safeguard tariff for prepayment customers (£1,031), which includes an additional allowance for serving customers with prepayment meters.
All suppliers maintained the same SVT price during the analysed period, except for British Gas and Utility Warehouse who increased their SVT prices from £1,025 and £1,089 to £1,101 and £1,125 respectively, effective from early/mid-September 2017.
Most suppliers currently offer tariffs, such as fixed deals, that are significantly cheaper than their SVTs. However, the range of available savings to existing customers is broad, from only £62 in the case of British Gas to around £220 for First Utility and E.ON. This indicates that while most SVTs offer poor value, other tariffs like fixed deals may not always offer good value.
In 2018, we plan to develop our monitoring to better understand whether suppliers are moving customers onto other poor value tariffs or onto better value ones.
What is a 'standard variable' tariff?
A standard variable tariff is a supply contract with an indefinite length that does not have a fixed-term applying to the terms and conditions. It’s an energy supplier’s basic, default offer. If a customer does not choose a specific energy plan, for example after their fixed tariff ends, they are usually moved to an SVT until they choose a new one. A customer can also make an active choice to select an SVT.