Energy bills: Ofgem sets out plan for simpler tariffs

 

Energy Secretary Ed Davey: "I welcome Ofgem's proposal's to make bills simpler"

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Energy regulator Ofgem has unveiled proposals to force suppliers to tell customers about the cheapest gas and electricity tariffs they have on offer.

Ofgem said the proposals, which the industry has described as "challenging", would make the market "simpler, clearer and fairer".

The plans include making firms show their cheapest tariff on bills.

It follows days of uncertainty over David Cameron's plan to force firms to put customers on their lowest tariffs

Ofgem's proposals also include banning complex multi-tier tariffs, new personalised information to help consumers find their best deal, and ensuring customers default to the cheapest option at the end of fixed-term contract.

Ofgem chief executive Alistair Buchanan said: "Our plans will put an end to consumers being confused by complex tariffs and will usher in a simpler, clearer, fairer and more competitive energy market for all consumers.

"I am glad to say that suppliers have already responded with some initiatives, but these do not go far enough."

Angela Knight, the chief executive of Energy UK, which represents the major suppliers, told the BBC: "What they have here is a pretty challenging set of requirements on the companies and we will work with Ofgem and others, once we have got the detail, to get what is in the best interests of our customers."

'Press forward'

Ofgem is proposing to limit each energy supplier to no more than four core tariffs for each fuel.

Analysis

Downing Street say they "welcome" the proposals from Ofgem.

Making bills easier to understand is "complementary with what we are trying to achieve," the Prime Minister's official spokeswoman said.

But is it complementary, or contradictory, given Ofgem are proposing compelling energy companies to comply with their ideas and this doesn't need new legislation?

A new law will "ensure" customers get the cheapest tariffs, Downing Street insist.

But when the Lib Dem Energy Secretary Ed Davey was given repeated opportunities this morning to support what the Prime Minister has said, he declined.

Drawing the simple out of the complex, it seems, is proving complicated in itself, and difficult to communicate.

Dual fuel discounts will be presented separately to increase clarity. A pilot scheme will force suppliers to tell the most vulnerable customers, and those who have not switched for three years,

On Wednesday, Mr Cameron surprised the energy industry when he said during Prime Minister's Questions that the government would introduce laws to make suppliers give customers the cheapest tariffs.

Energy Minister John Hayes said later that the government was only considering introducing such a law.

Ofgem will now conduct further consultation with the industry and consumers, and believes the proposals could be enforced from next summer.

However, the regulator said that there was nothing to stop energy companies starting to implement changes now.

Mr Buchanan said: "We have spoken to thousands of consumers who have helped us shape this package through a period of extensive consumer research, and are very grateful for their input.

"Ofgem is determined to press forward with proposals to deliver for consumers the most far-reaching shake-up of the retail energy market since competition was introduced."

Controlling bills

Mrs Knight, of industry body Energy UK, said: "Ofgem are saying to us is (you should have) a very small handful of tariffs, you have got to be very clear on them and tell your customers about them and give the customer the choice.

Ofgem's Ian Marlee explains how the new plans would work

"We need to have a set of proposals that are in the best interests of our customers and I think the customers do want choice. I do believe that choice is the right thing. I don't think we should say to the customer 'You must have this or that'."

She added that she had not seen Prime Minister David Cameron's proposals, after he suggested in the Commons that customers should be automatically put on a supplier's cheapest tariff.

Tom Lyon, of price comparison website Uswitch, said that the proposals were a move towards a more regulated energy market.

The changes would not solve consumers' problems with their suppliers, he told the BBC, "but it should make it easier for customers to take more control of their energy bills".

Richard Lloyd, executive director of consumer group Which?, said: "This is another big step towards helping people get the best price for their energy.

"These proposals will boost customer power, making it much easier to shop around, and should increase the pressure on the energy companies to keep their prices in check."

Start Quote

Ofgem has once again ducked the opportunity to get tough with the energy giants”

End Quote Caroline Flint Shadow energy secretary

However, Gary Hornby, an energy market analyst at Inenco, said this would not mean a release of the squeeze on household finances.

"Sadly, the cost of energy is still going to rise as a result of the need to reduce the UK's carbon emissions, investment in infrastructure, and rising wholesale prices - so even the best deals will still cost more," he said.

"The increased costs associated with energy generation and keeping the lights on are always going to be passed on to consumers at the end of the day."

Energy Secretary Ed Davey said that he welcomed Ofgem's proposals, saying that the plans would ensure people got the "best deals" from their energy company.

However, he failed to take the opportunity to back up the prime minister's comments in the Commons.

Caroline Flint, shadow energy and climate change secretary, said Ofgem's proposals were "only tinkering at the margins".

"It is deeply disappointing that after spending nearly two years putting these proposals together, Ofgem has once again ducked the opportunity to get tough with the energy giants," she said.

"We need to open up the books of the energy companies, but these reforms do nothing to improve the transparency of the prices these firms charge their customers."

New look billing information for statements and websites

Sample electricity tariff

Under Ofgem's proposals tariff information like this would appear on annual statements, switching sites and suppliers' websites. The Tariff Comparison Rate would also appear on bills.

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  • rate this
    +9

    Comment number 146.

    Why can't we have a single tarrif per company - a simple price per KWh? Such an arranagement would give clarity and unless a cartel was operating, drive down prices. A simple tarrif, without a standing charge, would benefit low users. The method of payment should be irrelevant. The duty of the Regulator would be to enforce quality of service and adequate investment in the infrastructure.

  • rate this
    +5

    Comment number 138.

    why does someone who use up 3 times as much energy is only paying 2 x the money? shouldn't we have sliding scale rates to discourage people from wasting energy and encourage people who save energy or have smaller CO2 footprint?

  • rate this
    +4

    Comment number 57.

    This proposal from Ofgem sounds better than the governments proposal but I'm not entirely sure about the need to ban multi-tier tariffs as they might be cheaper for some customers depending on their circumstances.

    But I don't agree with the governments proposal to force everyone onto a single tariff. Customers should be able to choose what tariff is right for them.

  • rate this
    +23

    Comment number 54.

    If the energy companies are to be forced to make clear what their cheapest offer is and made to offer it to all, why can we not adopt this in other areas? Phone? Internet? Water? Train tickets?

  • rate this
    +5

    Comment number 7.

    Writing a letter about the latest offers is not sufficient. I am already overloaded with letters and emails about new offers and don't have time to act on them all.

    There should be an option to automatically keep you on the cheapest tariff ...unless you specify that you want to manually select the cheapest tariff every year.

 
 

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