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
    +3

    Comment number 160.

    Simplifying tariffs is great but it does not deal with the main issue.
    We are still paying way too much for our fuel in comparison to what the energy companies pay & their outrageous profits.
    Lets have a tariff where we pay a lot less for our fuel.
    Also tell the public exactly how much you pay wholesale so we can see how much profit you are making off of us, the poor ripped off public.

  • rate this
    -4

    Comment number 159.

    I do wish people would stop being negative.
    OK, so we've been paying well over the odds but at least we have profitable energy and water companies (well, the French, Chinese and Americans do).And in fairness you can't expect the water companies to pick up the bill for infrastructure investment when the rail companies don't.
    Privatisation - you know it makes sense.

  • rate this
    +2

    Comment number 158.

    A step in the right direction. The multi-tier system sounds similar to the continent where throughout the year different tarriffs apply, which in turn could lead to cheaper bills over the year. Energy consumption dictates of course, so those people who waste energy should be made to pay more, compared to those who regulate usage around the home. You will never please everybody.

  • rate this
    0

    Comment number 157.

    What we actually need is REAL competition in the market, at the moment the Energy Suppliers are acting like a Cartel and rigging prices every winter just before we all start turning the heating up...

    Even if the Ofgem implements it's plan, the cheapest rates will simply increase to ensure the Energy Companies continue raking it in...!!!!

  • rate this
    +1

    Comment number 156.

    The energy companies are already well ahead of Ofgem in this - the way they ducked having to deal with customers switching to better rates was to charge exit fees (I'm not quite sure how Ofgem managed not to see that one coming, its pretty common behaviour).

    So all they have to do is notify you how much better the best tarriff is. Oh, and that'll be a £100 penalty to change sir. Surely?

  • rate this
    0

    Comment number 155.

    Standing charges should be outlawed! The wiring is in place in all streets and houses anyway.... It's no less than extortion!
    Would we hand over a few hundred quid a year to supermarkets even if we don't buy from them? As a payment because we could have bought from them if we wanted!??? NO!
    Profits generally of energy companies must be forced well down and not protected..

  • rate this
    +3

    Comment number 154.

    .

    Anyone who thinks this will reduce energy prices are living in cloud cuckoo land.

    All this will achieve is a universal high price and even less choice. The only way to reduce energy prices to a reasonable level is to nationalise them

  • rate this
    +6

    Comment number 153.

    @142. anotherPen "It’s time to phase out the domestic gas supply – everybody switching to electricity over time"

    Are you crazy? 1kW of gas is currently around 3.3p. Same amount of electricity is 10.3p. What you suggest would cost many lives each winter as people would die through not be able to heat their homes!!!!

  • rate this
    0

    Comment number 152.

    148 brora, at last someone speaking sense.

    I work from home and have to run 2 computers not to mention the heating etc.

    I don't waste power, but i can't avoid using it.

    Though i don't trust the energy companies on how to use less power, when they continue to spout the old mantra of not leaving things on standby, proven to be a complete myth

  • rate this
    +2

    Comment number 151.

    Ofgem should be pro-active rather than re-active, absolute nonsense and a totally ineffectuel regulator. What is the point of having a 'guard dog' and barking yourself.

    "The energy watchdog has paid more than £1 million in bonuses to staff in the past two years"

    "We are all in it together"

  • rate this
    0

    Comment number 150.

    Good! But they also need to look into why electricity prices vary so much by area. The Grid is national and supplies ALL electricity (no differentiation between 'green' and non-green). So as all electricity is on the grid the generation cost is averaged. Delivery cost is averaged too. So why is it more expensive to buy in Nottingham than it is in Swindon? It should be the same everywhere.

  • rate this
    0

    Comment number 149.

    Jeeze, things must be bad if we are relying upon inept quangos to undertake damage limitation in relation to Cameron's Maudesque stupidity.

  • rate this
    +3

    Comment number 148.

    138.Richard
    3 Minutes ago

    I don't think it's fair to say that those using more energy are necessarily wasting it. A couple for instance out at work all day will use less than an elderly person, people with babies or someone who is ill - they are stuck at home.

  • rate this
    +3

    Comment number 147.

    Amazing. Ofgem have had years in which to rein the energy companies in. Now they finally make some noise when they think they are about to lose their cushy little jobs because they previously did nothing

  • 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
    0

    Comment number 145.

    @121. Billythefirst

    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.

    --

    Only in the eyes of the already prejudiced.

    If the cap fits Billy old boy.....

  • rate this
    0

    Comment number 144.

    "Energy regulator Ofgem unveils proposals to force suppliers to tell customers about their cheapest gas and electricity tariffs. What is your reaction?"

    What's my reaction? That the energy companies will worm their way around regulations and still rip us all off...

  • rate this
    0

    Comment number 143.

    [sigh]

    Do you remember when the electricity came from an eletricity organisation, gas came from a gas organisation, water came from a water organisation?

    Wasn't that somehow more elegant than having electricity companies sell you gas, and gas companies sell you electric.

    Ahh, happier days. Now to plug the hoover in to cook the dinner.....

  • rate this
    -5

    Comment number 142.

    It’s time to phase out the domestic gas supply – everybody switching to electricity over time - thus saving millions of pounds on gas distribution with its inherent problems of disruption to roads and ongoing dangers. Gas is too precious to be continually wasted in the home.

  • rate this
    +7

    Comment number 141.

    That is the Angela Knight who was in charge of the BBA when it was responsible for LIBOR rate fixing? Now UK Energy rate fixing? I believe the UK petroleum retailers await!

 

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