Ed Davey announces 'four core tariff' plan


Ed Davey: ''Energy companies are hiding behind very complex, confusing, multiple tariffs"

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Energy companies will be able to offer only four tariffs each for gas and electricity under government plans to get customers a better deal on energy.

The government says it wants customers placed on the cheapest available price by summer 2014 at the latest.

However, ministers admitted they could not guarantee all households would see their energy bills cut.

Business and consumer groups warned the plans could mean some of the cheapest tariffs on offer disappear.

Labour welcomed plans to make tariffs simpler, but said the government also needed to reform the energy market and create a new watchdog to force companies to pass on price cuts.

The proposals, which are expected to be included in the forthcoming Energy Bill, have been put out for consultation until January.

'Bamboozled '

They include forcing energy firms to offer just four core tariffs for both gas and electricity - a fixed price for a fixed term and a standard variable rate, with two others based on different criteria such as payment method or whether renewable energy was a factor.

Energy suppliers would have to offer one price for each of the four tariffs, although they could still have discounts for dual fuel or lower cost payment methods such as direct debit.

Customers on "poor value" out-of-date tariffs, who are paying a higher rate than their supplier's cheapest standard tariff, will be switched to the cheaper rate.

Government plans to simplify energy tariffs

  • Energy companies will be able to offer only four tariffs for both gas and electricity.
  • These must include a variable rate deal and one with a fixed rate over a certain period of time.
  • The remaining two can be chosen by the energy supplier and may include a green tariff or similar, whatever the supplier thinks is competitive.
  • Suppliers must offer just one price for each of the four tariffs.
  • Expensive, out-of-date "dead tariffs" will be banned, with customers switched to their supplier's cheapest standard tariff.

Energy Secretary Ed Davey said households will be given personalised information from their supplier on their bills about the cheapest tariff the supplier offers for their payment method and the cheapest tariff overall.


Mr Davey told BBC News he couldn't guarantee all customers would see their bills cut, but the majority of people would benefit and it would be "easier" to get lower bills.

Addressing MPs later, Mr Davey said a lot of people were on out-of-date tariffs and "bringing them down is going to save some of those people, indeed some of the most vulnerable, money and that is the right thing to do".

The move would boost customer switching, he added: "Because there will be fewer tariffs and they will be simpler, it will make it a lot easier for people to compare and will actually help competition."

The government said it was building on recent proposals by the energy regulator Ofgem, which has been looking into pricing for some time.

Ofgem welcomed the move and said the proposals "will put an end to consumers being bamboozled by complex tariffs and deliver choice that consumers easily understand".

Currently most people buy their gas and electricity from just six big suppliers, although there are smaller suppliers, amid a vast selection of tariffs.

Renewable targets

The structure of the charges can vary depending on payment method (by direct debit, pre-payment meter, or credit transfer such as cheque), on whether it is an internet-only tariff, which part of the country the customer lives in, if the deal involves a fixed price, when the deal was launched, how long it lasts, and so on.

Christine McGourty, Energy UK: "Companies have already taken steps to simplify tariffs"

Business and consumer groups warned the plans could mean energy users paying more.

Adam Scorer, director of policy at Consumer Focus, said it was a "sensible move" but there was "a risk of unintended consequences and in particular a general levelling up of prices".

And the Institute of Directors said restricting choice would simply allow energy companies to increase their lowest tariff, ensuring a higher minimum price for consumers.

"Instead, the government should be promoting competition and making it easier for new companies to enter the energy market."

Angela Knight, chief executive of Energy UK, which represents the major suppliers, said any fall in energy bills could be limited because about half a bill is made up of costs other than energy - such as upgrading infrastructure, insulating homes and environmental levies.

Shadow climate change secretary Caroline Flint said: "The cheapest energy deal in an uncompetitive market will still not be a good deal. Unless the government really reforms the energy market, there's nothing to stop the energy companies just putting up the prices of all their tariffs.

"The time has come for a complete overhaul of our energy market."

Gas and electricity prices changes

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  • rate this

    Comment number 15.

    When will Thatcher's grandkids ever realise that you can't reconcile service with profit? Off with the froth!

  • rate this

    Comment number 14.

    Ending confusion marketing will help; people will no longer find they're adrift on "last year's" offer which is now this year's scam.
    But the real opportunity has been missed.
    Government should have moved to outlaw fixed term contracts altogether. They should have established a floor price - £20 say - in exchange for which any contract would be ended.
    This would make real competition possible.

  • rate this

    Comment number 13.

    A better idea would be to have no daily charge, no funny dual energy deals. A simple standard unit cost and a night unit cost and then let the energy companies fight it out where we can see an easy direct comparison.

    The advantages are that energy-efficiency measures will be more cost-effective and people will see a greater impact when taking simple measures to save themselves money.


  • rate this

    Comment number 12.

    Tinkering around the edges.
    All that will happen is that the energy companies will look at how much revenue they hope to get from current tariffs and ensure that the new tariffs will result in the same level of income plus a sustantial increase no doubt.
    The price of energy is high because we import so much energy having closed our mines, gas works, power stations etc.

  • rate this

    Comment number 11.

    Call me selfish, but I'm happy for the energy companies to be charging people who are too lazy to switch tariffs or suppliers. Their inertia undoubtedly subsidises the tariff I am on. With this government spoon-feeding measure, I'm pretty certain that the lost earnings from the energy companies will be loaded onto my tariff. Make tariffs easier to understand, yes. Automatic switching? Nonsense!

  • rate this

    Comment number 10.

    Nationalise them.

  • rate this

    Comment number 9.

    We'll now have a transparent cartel so all the companies can rip me off equally....I feel so much better.

  • rate this

    Comment number 8.

    A small number of tariffs and being put on the lowest "suitable" tariff is no good if you still cannot afford it!?!

    We've been strip mined as far as paying for utilities are concerned since the 80's, and it's about time prices came down and profits were driven back into the infrastructure (very little actually is at the moment) instead of being creamed off for the shareholders and fat cats!

  • rate this

    Comment number 7.

    Is this even news?

  • rate this

    Comment number 6.

    So prepare fro the energy cartel to have a meeting and align their cheapest deals to within a couple of pennies difference between them all. Whatever happens it is too little, too late and Caroline Flint needs to choose her words carefully, as her party in government did nothing at all to help consumers.

  • rate this

    Comment number 5.

    What a joke - the energy companies will just raise the price of the lowest tariffs, to compensate.

    We are NOT all in this together.

  • rate this

    Comment number 4.

    OR the energy companies could just stop ripping us off...

  • rate this

    Comment number 3.

    I look forward with interest...

    But I suspect it'll be just hollow words or the energy companies will find a way round any "impositions"

    Could this government EVER come up with something that is simple to understand, unambiguous to implement and accepted by the general public (which it is supposed to serve)

    Don't hold your breath....

  • rate this

    Comment number 2.

    A better plan would be top re- nationalise the whole lot and give the public a fiar deal. Thatcher has a lot to answer for!!

  • rate this

    Comment number 1.

    A better plan would be to nationalise one of them and lower the prices there, forcing the rest to come into line or lose their customers.


Page 49 of 49


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