(Adds Centrica CEO comment, updates with Centrica's policy prescriptions for competitive energy market)
LONDON, Nov 20 (Reuters) - Centrica, Britain's biggest domestic electricity and gas supplier, promised on Monday to scrap a widely criticised higher rate tariff for new customers as the industry moved to see off price caps threatened by the government.
Prime Minister Theresa May said in October she would impose controls to end what she called "rip-off energy prices" - home power bills have doubled in Britain over the past decade to an average of about 1,200 pounds ($1,500) a year.
Centrica, the owner of British Gas, said it would stop offering its standard variable tariff - a payment targeted by the government cap that utilities have charged if a customer does not opt for generally lower specific fixed-term deals.
"We fully recognise that the energy market can and should be improved, but further price controls will only set this back," Centrica Chief Executive Iain Conn said.
Last year, the Competition and Markets Authority found that British households overpaid a total of 1.4 billion pounds a year on average from 2012 to 2015 because of uncompetitive standard energy tariffs. Utilities have denied overcharging.
Centrica said it would give customers a choice of at least two, three-year tariffs at the end of their contract period as part of an attempt to move all customers off SVT deals, improve customer service and simplify bills.
It will also set up a new 12-month default tariff with no exit fees for customers that do not pick a new contract after their existing one expires.
The changes would be introduced by March 31, 2018, it said.
Centrica also called on industry, government and the Ofgem regulator to address market failures and distortions and proposed funding energy policy costs through general taxation and not via bills.
Utilities have long said the bigger bills are partly caused by rising government energy policy costs, including renewable energy subsidies.
"While we recognise it would not be easy, we believe the government should consider a less regressive mechanism to recoup policy costs, to protect those on the lowest incomes for whom energy is a higher proportion of their outgoings," it said.
The supplier also called on the government to phase out SVT deals altogether and prohibit tariffs without an end-date, arguing that such deals reduce customer engagement. ($1 = 0.7556 pounds) (Reporting by Kate Holton and Oleg Vukmanovic; Editing by Paul Sandle and Andrew Heavens)