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Energy bills: When will they become clearer?

Money and energy bill
Image caption Energy bills should become clearer by the start of next year under Ofgem's reforms

Two years ago the energy regulator, Ofgem, said energy firms must offer a simpler tariff structure.

At that time it found 300 different tariffs were being advertised by energy companies.

But instead of things getting simpler, they have become considerably more complex.

In January this year, Ofgem identified no less than 900 tariffs available, which it said were "bamboozling" customers.

With such a bewildering variety of options, it is perhaps not surprising that customers of SSE were vulnerable to mis-selling.

So when will bills actually become clearer?

'Radical shake-up'

Ofgem is currently consulting on a series of reforms, some of which will begin to take effect in the summer, probably around August.

These relate to new standards of conduct, under which suppliers must treat customers fairly.

The new standards will cover the way that energy contracts are marketed to customers.

In February, Ofgem chief executive Alistair Buchanan said: "We are now counting down to the most radical shake-up of the energy retail market since competition began."

But many other reforms will still not be in place until the end of the year, when customers may again be facing larger bills for electricity and gas.

These changes will include:

  • a cap on the number of tariffs. Suppliers will only be allowed to offer eight (four for electricity and four for gas)
  • an end to multi-tier tariffs (e.g. the first 1,000 units at a higher rate)
  • a single unit rate to be advertised (quoted in pence per kilowatt-hour)
  • banning price increases during a fixed-term contract.

By the start of 2014, bills will also have to show the cheapest tariff.

Any customers on so-called "dead" tariffs (i.e. rates no longer promoted), will have to be transferred to the cheapest variable rate tariff. "Dead" tariffs are usually more expensive.

But some consumer groups argue that Ofgem's reforms do not go far enough.

Under the current proposals, firms will be able to use a standing charge and a single unit rate.

But Which? believes that could still be too confusing, and wants comparisons to be made on the basis of the single rate only.

It says the best way to compare would be for prices to be displayed per kilowatt-hour (kWh), the cost of using one kilowatt of power for an hour.

"For this to happen the price of every tariff should be presented in a clear, consistent and simple way, through single unit prices like those for petrol and diesel," said a spokesperson.

'No loopholes'

In response to concerns about the timetable for reform, Ofgem said suppliers were already making changes in advance of the new rules.

"They know they have to rebuild customer trust, and they are working to do that," said a spokesman.

Doorstep sales are already covered by licence conditions, but in practice all the suppliers have now decided to end doorstep selling, according to Ofgem.

The Energy Bill, currently before parliament, should increase protection for consumers further.

When it becomes law, it will force suppliers to move customers onto the cheapest tariff automatically.

Energy companies will also have to tell customers if they could get a better deal on a different tariff from the same company.

It will also extend Ofgem's powers to third-party intermediaries, such as comparison websites.

"Our aim is that consumers will get the best possible energy tariff - no tricks, no loopholes," said Prime Minister David Cameron when the bill was introduced last autumn.

"The bill will make sure that all energy customers are put on their supplier's lowest variable rate unless they choose otherwise," he said.

In the meantime Ofgem has produced a number of factsheets to try to explain bills to customers.

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