Energy bills: Ofgem sets out plan for simpler tariffs

 

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

Related Stories

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.

.

 

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • 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.

 
 

More Business stories

RSS

BBC Business Live

  1.  
    FLYBE EXPANSION 07:38:
    City airport

    Budget airline Flybe has announced a five-year deal with London's City Airport. New routes to and from Edinburgh, Belfast, Dublin, Inverness and Exeter will start in October.

     
  2.  
    PATISSERIE TO FLOAT 07:31:

    Patisserie Holdings, which owns five brands including the high-street chain Patisserie Valerie, has announced it will float on the London Stock Exchange. The company says it is seeking to raise approximately £33m.

     
  3.  
    HEADLINES
     
  4.  
    FRACKING 07:18: BBC Radio 4

    Ed Davey is also asked about fracking, and whether companies will be allowed to drill under private land without the permission of owners. Mr Davey says the government is "looking at the access rights". "The question is how those land owners are compensated and how those projects can go ahead," he adds.

     
  5.  
    GREEN ENERGY PROJECTS 07:16: BBC Radio 4

    Energy and Climate Change Secretary Ed Davey is on Today. He says the eight projects will add 2% to the average energy bill by 2020. But in return we are getting "secure, clean energy". He says the government has more renewable energy projects than they are prepared to pay for, so if any of the eight companies drop out, there are others who would take their place.

     
  6.  
    PRIMARK US VENTURE 07:12: Breaking News
    Primark

    Budget clothing retailer Primark has announced it is venturing to the US. The company, which is owned by Associated British Foods, says it will open its first American branch in Boston by the end of 2015. It plans to open further stores in the north-east of the country in 2016. Given the experience of Tesco and M&S in the US, you have to admire their optimism.

     
  7.  
    GREEN ENERGY PROJECTS 07:08: Breaking News
    Wind farm, Burbo Bank

    The Department of Energy and Climate Change has announced 8 big green energy projects. The contracts are expected to support 8,500 jobs. They include offshore wind farms and conversions of coal-powered plants to run on biomass. The projects will provide up to £12bn of private sector investment.

     
  8.  
    EXECUTIVE PAY 06:56: Radio 5 live

    Mike Amey is back on Radio 5 Live. He's discussing Vince Cable's warning over bankers' pay. He says the business secretary wants shareholders to be able to vote down pay, and good internal governance. If these measures fail to be implemented, there could be "another round of regulation coming down the tracks".

     
  9.  
    RUSSIAN TECH BOSS 06:45:
    Moscow Times

    This from the Moscow Times. The founder of Russia's biggest social networking site fled the country on Tuesday. Pavel Durov, who founded Vkontakte seven years ago, was forced out of the company on Monday for refusing to share users' personal data, according to the article. It says the social network is now controlled by billionaires Igor Sechin and Alisher Usmanov, who have close links with the Kremlin.

     
  10.  
    NICER NISA? 06:39: Radio 5 live
    NISA

    Amid the furore over the Co-op, here's a mutual that's doing quite well. NISA, which stands for National Independent Supermarkets Association and operates over 4,000 stores, has reported a 10% rise in sales. Chief executive Neil Turton tells Wake Up to Money NISA was founded in 1977 when locals "joined together to combine their buying power". Mickey asks him if NISA convenience stores are more expensive. "Price is not the big thing for consumers - it's availability," says Mr Turton.

     
  11.  
    EXECUTIVE PAY 06:33: BBC Radio 4

    The Today programme picks up on comments by Business Secretary Vince Cable. He has written to all FTSE 100 companies and urged restraint over pay. In a recorded clip on Today, Mr Cable said pay had, in the past, reached "ridiculous and dangerous levels" in the banking industry. But he said companies now have a chance "to make peace with the public". Mr Cable singled out Barclays, which has its annual meeting on Thursday.

     
  12.  
    MARKET TRENDS 06:25: Radio 5 live

    Mike Amey has more interesting markets analysis, after other pharma shares, notably Astrazeneca, also did well yesterday. "The two areas where there's the most activity at the moment are the pharmaceutical sector and things like telecoms and cable - which are both quite stable income streams, whether the economy does well and badly," he explains. When the economy starts to do better, activity starts off in the stable sectors and moves out to others, so what we are seeing is a "pretty decent recovery".

     
  13.  
    PHARMA SWAP 06:15: Radio 5 live
    Pills

    Pharma, which is business speak for pharmaceutical companies, is back in the news, with Swiss firm Novartis and GSK swapping assets yesterday. Mike Amey, managing director at Pimco, tells Wake Up to Money they are sensibly focusing on their areas of expertise and not trying and be "all things to all men". Investors seem to agree - shares in GSK went up 5% yesterday, and Novartis did well too.

     
  14.  
    SECURITISATION IS BACK 06:09: Radio 5 live

    The securitisation of debt - in which bundles of loans are sold on to investors - was one of the factors which led to the 2008 crash. But now both the ECB and Mark Carney are saying it could be a way to get money into the system again. Richard Hopkin, head of securitisation at AFME, tells Wake Up to Money the success of securitisation depends on who's in charge. He uses an analogy: "Cars don't cause accidents, it's the people driving the cars".

     
  15.  
    JAPAN TRADE 06:03: BBC World News
    Linda Yueh

    Barack Obama makes his first state visit to Japan today. He is expected to push the Trans-Pacific Partnership - an important trade deal that would eliminate trade barriers and standardise regulations. But, in a report on World Business Report, chief business correspondent Linda Yueh says Japan's rice farmers are worried it will mean the end of protection - in particular a 778% tax on imported rice.

     
  16.  
    06:02: Joe Miller Business Reporter

    Good morning. You can contact us throughout the morning by tweeting @BBCBusiness or emailing bizlivepage@bbc.co.uk

     
  17.  
    06:01: Ben Morris Business Reporter

    Good morning. We're expecting the government to announce several big green energy projects today. So stay with the Business Live page for that.

     

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.