British Gas parent company Centrica has urged government to reform the way energy policy costs are collected amid a raft of proposals it believes would be more effective than a cap on prices.
The firm believes energy policy costs should not be collected via bills but through general taxation and that smaller suppliers should no longer be exempt from environmental and social levies.
The company also warned a price cap could “derail” the smart meter rollout and thinks the government should drop the 2020 rollout deadline and make it an opt-out rather than opt-in choice for the UK’s 30 million households.
Centrica added that government should move to end standard variable tariffs. The supplier said it would stop offering SVTs to new customers and contact its existing SVT customers twice a year to offer them better value fixed contracts.
By taking several other actions around tariffs by March 2018, the supplier hopes to head off the government’s proposed cap on prices.
It asked government to think about making deeper market changes instead.
Small energy suppliers should have to pay social and environmental costs, said Centrica, otherwise, some customers (i.e. those of large firms) are subsidising others.
Moreover, all energy policy costs should be taken out of energy bills altogether and into a “less regressive” mechanism such as general taxation, said the firm. “The energy system must change, and it is not cheap,” it stated.
“These costs should be paid for more fairly with a greater burden carried by those who can most afford it.”
Such a move might not be “easy” for politicians, but would take £5 billion from annual energy bills, or £200 from the average bill, suggested the company.
Centrica, which some years ago took a strategic decision to try to gain first mover advantage by ‘going early’ with its smart meter rollout, also urged government to “make the smart meter rollout more efficient and avoid price controls derailing it”.
It could do this by making customers have to opt out of the programme (currently households have to choose to have a smart meter) and reviewing the 2020 deadline, which Centrica said “incentivises companies to hold back, hoping to acquire customers with meters at the end of the period rather than install their own”.
Centrica has installed some 4.5m smart meters, which it said was more than all of its peers combined. That has added some £40 to the average British Gas customer bill.
“There is a real danger that a price control will derail the smart meter rollout and lead to companies implementing the programme more slowly,” said the firm.
The company also warned of job losses and damaged investor confidence if a poorly designed price cap is implemented.
See further details of its proposals here.