E.on has announced it is to scrap its standard variable tariff for many customers from next year, replacing it with a cheaper one-year fix with no exit fees – though you'll need to have a smart meter or already be on a fixed tariff to benefit.
The energy firm is the first of the big six providers to act on standard variable tariffs (SVTs) – the expensive default energy deals about 66% of households are still on.
From next year if you're on E.on's standard tariff and have or arrange to have a smart meter installed, or if you're on a fixed E.on tariff which comes to an end, you'll automatically be placed on the new one-year fix.
However, E.on's yet to reveal how much this new default tariff will cost. While it has said it will be cheaper than its SVT, it's unlikely to be among the cheapest on the market. So don't assume it will be a good deal – instead, do a comparison to find the best deal for you.
What is a standard variable tariff?
SVTs are energy suppliers' default tariffs. If you've never switched it's likely you're on one of these, while those on fixed deals are automatically rolled onto this tariff once their fixed-term period expires.
The cost of an SVT is, as the name suggests, variable. So the rate you pay can go up or down depending on wholesale energy costs – what suppliers pay for gas and electricity – and there are no exit fees or fixed end date.
They also tend to be among the most expensive deals. Across the big six, the average SVT costs a typical dual-fuel household £1,151/year on average – around £330/year more than the cheapest deals on the market.
How will E.on's new default tariff stack up?
Unfortunately at the moment we don't know what E.on's new default tariff will cost – so it's hard to say if it will mean a significant saving for those who would otherwise move to its SVT.
Either way, to find your cheapest deal it's best to do a full comparison – you can do this via our free Cheap Energy Club now without waiting for E.on's new tariff to come in.
E.on hasn't yet given a start date for its new tariff, but here's what we know so far:
- It will be the new default tariff for anyone who has or gets a smart meter, or anyone on a fix which comes to an end (regardless of whether or not they have a smart meter).
- It will be fixed for one year, meaning your rate will be locked in for that period.
- After 12 months you'll be rolled over onto another default fixed tariff – though if E.on's prices have gone up during that time, yours may well too.
- There are no exit fees so you can switch away from the default fixed tariff penalty-free at any point, or move to another E.on tariff.
'Standard variable tariffs have had their day'
E.on chief executive Michael Lewis said: "We believe standard variable tariffs have had their day. [This announcement] is about helping customers engage with the market with tariffs that work for them.
"For us, smart meters are a key means to achieve this move because they represent a natural opportunity for engagement with our customers, and the new technology opens up a world of more accurate billing and greater choice. We'll be ramping up our activity next year so we're able to start taking thousands of people off [the] standard variable tariff each week – added to which, their smart future will begin with a price drop.
"However, this isn't only about smart metering customers. We'll also be working on options for classic meter customers joining us or coming to the end of fixed-term tariffs."