British Gas owner Centrica is scrapping standard gas and electricity tariffs (SVT) for new customers ahead of Government plans to impose a price cap on the costly energy products.
The Big Six energy supplier also vowed to introduce simpler bills and a new fixed-term default tariff for customers who do not shop around for the best deal once their contract finishes.
It said the reforms would be enforced by the end of March next year.
It came as the energy giant called on the Government and Ofgem to engage over the reforms to help create a fairer market without price controls.
Centrica urged the energy watchdog to follow its lead and remove SVTs from the market to encourage more customers to switch tariffs.
While group chief executive Iain Conn recognised the need for the market to improve, he said price caps would only set the industry back.
He said: “Today we have set out the unilateral actions we will take to improve the UK energy market for our customers.
“This starts with the withdrawal of the standard variable tariff which contributes to lower levels of customer engagement.
“We also believe that further measures by Ofgem and the Government are required so that together we can create a market that works for everyone, where there is improved transparency and a fairer allocation of costs currently included in the energy bill.
“We have long advocated that the end of the standard variable tariff is the best way to encourage customers to shop around for the best energy deal.
“But we also need a fairer way to pay for the changing energy system by removing Government policy costs from energy bills.”
Britain’s Big Six are bracing for a raft of regulatory changes after the Government announced a price cap will be imposed on poor-value energy tariffs.
It follows an investigation by the Competition and Markets Authority (CMA), which found 70% of Big Six customers are on pricier SVTs and could save £300 by switching to cheaper deals.
Around 4.5 million of Centrica’s 8.3 million customers – or about 60% – are currently on SVTs, with 70% of profits coming from the company’s SVT customer base.
Among the reforms, Centrica said it will provide customers with a range of competitive fixed-term tariffs, with no exit fees pinned to the default – or emergency – tariff.
It will also encourage SVT customers to switch by targeting them with better deals.
Focusing on the proposed price cap, Mr Conn said if all energy companies removed the SVT then it would have “an influence on the Government’s intention to put in a price control”.
However, he insisted the reforms were not prompted by the Government’s threat to cap energy prices.
He told BBC Radio 4’s Today programme: “We have actually been working on these proposals for many months now.
“We have been saying for the last 18 months that we think the best solution for this market is to end evergreen contracts, contracts that don’t have an end date.
“We obviously had to pause when Theresa May announced her intention to cap the market but we have now announced today a comprehensive set of actions to reform the market, starting in our case with the removal of the standard variable tariff.”
He said the Government should prohibit open-ended contracts and remove the cost of green energy costs from household bills.
The announcement comes amid a shake-up in the energy market, as the Big Six providers look set to become the Big Five after SSE and NPower reached an agreement to merge their operations to create a new UK energy supplier.
A spokesman for the Department for Business, Energy and Industrial Strategy said: “Centrica’s decision to put an end to poor value tariffs is an encouraging first step in helping to create a fairer energy market.
“We will not rest until we see the £1.4 billion consumer detriment identified by the Competition and Markets Authority addressed – which is exactly why we published draft legislation to cap tariffs last month.”
Shares in Centrica were marginally lower in morning trading on the London Stock Exchange.
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