Business

Energy bills: PM delivered 'intent, not detail'

  • 30 October 2012
  • From the section Business
Media captionAndrew Wright, Ofgem: ''We haven't yet seen what these proposals are"

The prime minister announced the "intent, not the detail" of a plan to put energy customers on the cheapest tariff, the energy minister has said.

Greg Barker told the Commons' Energy Committee that new legislation would be the "desirable" option to make changes.

But earlier, the energy regulator said there was a "key difference" between its plan for customers' bills and the prime minister's proposal.

Ofgem simply proposes that cheaper deals are highlighted on bills.

'Same direction'

The committee questioned the minister and representatives from the regulator about David Cameron's statement during Prime Minister's Questions that the government would introduce laws to make suppliers give customers the cheapest tariffs. The comment surprised many in the industry and on the committee.

Tim Yeo, who chairs the committee, said that there had been no hint of the new policy when proposals for the Energy Bill were scrutinised by the committee previously.

Mr Barker, the energy minister, blamed Ofgem for delaying the publication of its own plans, adding that the situation was "eloquently expressed" by the Prime Minister.

"He was announcing the intent, not the detail," he told the committee.

"Our thinking is running in the same direction [as Ofgem's]."

He added that new legislation was the "desirable" outcome of the government's thinking to "help customers get the cheapest tariff".

Earlier, Andrew Wright, Ofgem's senior partner for markets, said that the regulator and the Prime Minister had the "same objective" of making customers aware of the cheapest deals.

However, he admitted that there was a key difference between Ofgem's recently announced proposals and the policy announced by Mr Cameron.

He said under the regulator's plan, customers would have to opt in to a cheaper deal. Under Mr Cameron's plan, customers would be automatically switched and have to opt out of the move.

"We haven't seen the details [of the PM's proposal] yet, but hope they complement rather than conflict with ours," he said.

He described Mr Cameron's comments as a "significant intervention".

Timetable

Ofgem announced proposals earlier this month to ban complex multi-tier tariffs, provide personalised information to help consumers find their best deal, and ensure customers default to the cheapest option at the end of fixed-term contract.

Image caption Ofgem proposes to limit suppliers to no more than four core tariffs

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

These changes could be enforced by next summer, using the regulator's existing powers, although the energy companies could appeal.

The plans were announced two days after Mr Cameron's comments about customers being placed on the cheapest deal.

The prime minister's plan would require a change in the law through the upcoming Energy Bill, which will need to be agreed by Parliament.

But Mr Wright, of Ofgem said: "Not all consumers will be in positions where they will necessarily want to be moved onto the cheapest deal with their supplier."

This may include people paying a little more for green tariffs, or those choosing the stability of fixed deals, rather than variable deals that might be a little cheaper.

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