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.


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

    Comment number 140.

    @134 "you can bet the energy companies would rig it so they put you on tarrifs which may be cheaper monthly but not annually"

    So how are they going to achieve that then? By changing the number of months in the year? 12 x month = year in my calendar, so what you are saying is impossible!

  • rate this

    Comment number 139.

    Whatever the lowest tariff 's are at the moment should be protected by legislation if this is to go ahead.... or they will just put up the lowest tariff before telling us about it!

  • rate this

    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

    Comment number 137.

    132. There's a fly in you.

  • rate this

    Comment number 136.

    This should be the case for any service and one that springs to mind is the Railway, it is criminal the way these large multi billion pound companies deceive the public and make out they are doing us a favour.
    My mother and father were recently duped into paying over $300 for tickets when they could have paid less than a $100 it is deceit and predatory and should be a very serious crime

  • rate this

    Comment number 135.

    Any changes should have regard to:
    1) prices should be simple, transparent and easily understood;
    2) price should increase the more energy a household uses to encourage conservation of resources;
    3) there should be no reduction for using one supplier for everything;
    4) energy supply companies should be allowed to make a "reasonable" profit and
    5) easy to change supplier.

  • rate this

    Comment number 134.

    ..given us credit for the extra money we actually paid, followed by a message to tell us we'd now been placed on the correct Tariff

    The issue I have with that is that one may be on a particular tarriff for long term rather than short term benefit. you can bet the energy companies would rig it so they put you on tarrifs which may be cheaper monthly but not annually

  • rate this

    Comment number 133.

    Is it me or do people really think this new policy will make it any better for customers.
    If companies have to tell customers which is the cheapest tariff, won't it just result in them making sure that their cheapest tarif is a fixed term tariff that is only marginally better than their other tariffs but isn't very good compared to rivals. Customers will then be tied in for years on bad deals.

  • rate this

    Comment number 132.

    I agree with Donal Rockhopper. Train tickets in particular seem much more in need of this type of legislation than energy bills do.

  • rate this

    Comment number 131.

    Surely it is time for us to have Ofgem enforce with government backing a tariff that is based upon cost plus.E.g if the wholesale cost of a kW of gas is 3p and the cost of maintaining the network is £72/customer/yr and they are allowed 5% profit, then everyone would pay £6.30/mth standing charge and 3.15p per kW of gas, Simples! ;-)

  • Comment number 130.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 129.

    i don't understand why there are tariffs in the first place - it's not like there is 'premium' grade gas like petrol?
    So one kind of gas sold at the best price to customers - competition comes from NOT inventing tariff products to sell but by UNDERCUTTING YOUR COMPETITORS!!! DO you remember that you monopolising shysters????

  • rate this

    Comment number 128.

    Camerons on the hoof new policy was actually a bit of obscurification, the real issue is energy prices continually rising when most peoples income isn't, causing a fall in living standards & real hardship for some. Diverting attention to getting the cheapest deal available is just dodging the real issue -the cost of the cheapest deal available is continually rising

  • rate this

    Comment number 127.

    Love the new look bill. Basically what the energy companies will be showing us is just how much we could have saved if we weren't so dumb & had chosen the correct Tariff first of all.
    If Ofgem wants to consumers, the bills should show us what we could have saved, then given us credit for the extra money we actually paid, followed by a message to tell us we'd now been placed on the correct Tariff.

  • rate this

    Comment number 126.

    So how do they work out the cheapest price for each customer?

    Are they going to send a letter referring to past years usage stating you would be better on option X, could it be that simple, but would you believe them? and then there is the competition options, it's a minefield.
    I for one would be happy with one price suits all, same as fuelling the car, everyone pays the same.

  • rate this

    Comment number 125.

    Why should i subsidise the luddites who won't pay by direct debit?? Late payers are a real issue to cash flow of any business. Not to mention the costs of admin on cheques etc

  • rate this

    Comment number 124.

    Ed Davey, changes his leader's position from,' we will force them to give the lowest tarriff' to 'we're looking in to what we can do'.
    The toothless Dragon, OfGem tells us what their going to' suggest' they should do.
    The result?
    Tory paymasters in the multinationals who own the Energy Companies will raise the cost of minimum tarrifs to maintain profit then tell us what a great deal it is.

  • rate this

    Comment number 123.

    It doesn't matter when there cheapest is artificially expensive. How about forcing companies to lower their prices, not just flashing the best of the worst at you?

  • rate this

    Comment number 122.

    106 Cherry
    Even you contradicted yourself, starting with 5 tariffs, then adding two more, and I can add two more to that, Twinheat A and Twinheat B. These tariffs are related to specific electric heating systems and need to be available for people who have installed these systems, otherwise the heating system won't work. Electricity is a complicated issue and cannot be simplified as Ofgem propose

  • rate this

    Comment number 121.

    109. Some Lingering Fog

    That's taken the wind out the Labour party and the BBC's sails
    How so? Cameron has already made a complete buffoon of himself, again - he looks as incompetent and compromised as Hunt, May and Osbourn.


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