Energy bills 'still confusing', says Which?
- 14 March 2014
- From the section Business
New simplified energy tariffs are still too confusing, the consumer group Which? has claimed.
In a survey of 500 people, it found that only 35% picked the cheapest deal, when presented with bills in a new format.
The new bills - being brought in by the energy regulator Ofgem - are designed to make charges easier to understand.
Ofgem defended the changes, saying Which? had not taken account of all its forthcoming reforms.
Since January, energy suppliers have had to advertise their tariffs in terms of two rates:
- A flat-rate standing charge, expressed on a daily or yearly basis
- A unit rate, which shows the cost of each unit of electricity or gas consumed
The new tariffs are already used on price comparison sites, but the first bills showing them will not be sent out until 1 April.
Previously, not all companies quoted a standing charge, and some quoted two tiers of unit rates, a higher and a lower rate.
But the Which? survey showed widespread confusion when consumers tried to work out which was the cheapest rate on the new-look bills.
Even amongst those who used a calculator, only half managed to spot the best deal.
The following examples, taken from suppliers' websites, show why the new rates are still potentially confusing:
- Npower: Standing Charge: 0p per day. Unit Rate: 17.105 p/kWh
- SSE: Standing Charge: £60 per year. Unit Rate: 13.99 p/kWh
- British Gas: Standing Charge: 26p per day. Unit Rate 12.27 p/kWh
Consumers not only need to so some mental arithmetic to work out the cheapest deal, they also need to know how much gas or electricity they use in a year.
"In spite of Ofgem's tariff reforms to simplify the market, consumers are still failing to spot the cheapest deal because energy pricing remains too complicated," said Richard Lloyd, the executive director of Which?
The consumer group would like to see a single flat rate for energy, as happens with the price of petrol.
In an attempt to provide that, Ofgem will introduce a Tariff Comparison Rate (TCR) on bills from April, similar to an APR comparison on a loan.
This is designed to combine the Standing Charge and the Unit rate into a single measure.
For example, bills might show a TCR of 15.24p/kWh, which consumers should be able to compare directly with other suppliers.
But Which? warned that TCR is calculated only for a medium user of energy, so it does not always provide an accurate guide for switching supplier.
Ofgem said it had conducted widespread research amongst consumers before deciding on its reforms.
"We are confident that our reform package will make the market simpler, clearer, and fairer for consumers, and make it much easier for them to choose the right deal," said Philip Cullum, Ofgem's Consumer Partner.