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Customers on "poor value" out-of-date tariffs, who are paying a higher rate than their supplier's cheapest standard tariff, will be switched to the cheaper rate.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  • Expensive, out-of-date "dead tariffs" will be banned, with customers switched to their supplier's cheapest standard tariff.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

'Out-of-date'

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
    +5

    Comment number 35.

    Complained to ofgen about number issues incl practice of ramping up direct debits so they could borrow billions frm customers 0% interest. Was told its standard practice, doing nothing wrong. 2yrs on an MP rised it...suddenly an ofgen investigation. 2yrs later..just changed supplier, £384 over paid in one year...after they ignored my emails and phone calls asking them to stop raising it.

  • rate this
    +41

    Comment number 34.

    Co-op Energy have just slashed their prices in line with the drop in the wholesale price.

    Co-op being an incredibly small player in this field has no advertising and therefore no-one knows they even do energy.

    Definitely the best move i ever did was switching to them.

  • rate this
    +2

    Comment number 33.

    Seriously - what about a new energy company being created that ran as a co-operative and gave a percentage of profit back to it's members whilst at the same time undercutting the big six? Who'd sign up for that? I know I would......

  • rate this
    +4

    Comment number 32.

    More window dressing from cameron,without any real substance or help to the people.
    What we need is a clear no to increases above inflation and stringent controls over any price rises at all.
    We are,once again,being ripped off by his mates in these geerdy corperations.
    Why won't ANY politician come out and offer what we need.!!

  • rate this
    +1

    Comment number 31.

    We installed a wood burnig stove to save money on heating but according to my supplier I managed to use double the amount of gas. ???????

  • rate this
    +3

    Comment number 30.

    Still no mention of the tarif charged to pre-payment users - and these ARE the poorest in our community.

  • rate this
    +1

    Comment number 29.

    This will obviously be as well thought out and effective as all the governments recent ideas.
    So I'll wait for my bill to go up then.

  • rate this
    +5

    Comment number 28.

    More daft, dilettantish twaddle by this government. Energy companies will always maximise profit no matter what. SSE recently put up its prices by 9% while increasing its profit by 38%.

    What we want is cheaper energy no matter what tariff. These outfit will always set out to confuse. Their statements confuse. It helps them get extra profit from direct debit suckers.

  • rate this
    +63

    Comment number 27.

    WE DONT WANT NEW TARIFFS!! WE WANT PRICE CUTS NOW!!

    I am working full time but earn close just above minimum wage.
    After paying Rent , council Tax, Water etc I have little left for other bills.

    I work long hours and struggle every day to just exist.

    I am constantly looking for better paid jobs or ask my employer for better pay but they dont listen.

    WE need price cuts Now

  • rate this
    +66

    Comment number 26.

    The energy companies have long demonstrated their greed and their lack of respect for the customer. In a recession with so many homes in fuel poverty, this is more than disgraceful, it is criminal.
    Take away their powers and nationalise them. ASAP.

  • rate this
    +6

    Comment number 25.

    It doesnt matter how they change it, they will still do it in a way where the customer is conned into paying the high rate. Why Tariffs anyway. Why cant we have one charge for one service ie Water ! Its not difficult is it. They want to confuse you

  • rate this
    +5

    Comment number 24.

    More tinkering with the election in view, and it'll ultimately have no effect on what consumers pay overall.

  • rate this
    -1

    Comment number 23.

    The wont get it past the EU. It's all a game.

  • rate this
    -17

    Comment number 22.

    you guys still using primitive fossil fuels you know they are cancerous right? Also, cause lung diseases especially in children asthma. The oil rig deaths and spilliage of the highly cancerous crude oil killing the food chain the eye less tumour ridden skrimp in the USA etc. Hydroelectric power on a water planet come on you dumb fools before your all dead.

  • rate this
    +1

    Comment number 21.

    Legislate and force the energy production companies to sell their power on an open, transparent market. Retail arm to be seperated from distribution and production which will create a level playing for new retail players. Legislate the energy production companies to buy their gas/coal etc on the open market rather than their wholesale arm at an inflated price. Encourage more co-ops.

  • rate this
    +1

    Comment number 20.

    A step in the right direction, but this doesn't go far enough, you should be charged the lowest price based on your consumption, so at the end of the billing period the cheapest tariff should retrospectively apply and your bill should be calcaulted based on.

  • rate this
    +5

    Comment number 19.

    All essential service industries should be run by the state on a non-profit basis. The idea that the planet’s natural resources are there to be exploited by the profiteers is obscene. On a basic state pension many of us will be spending all of our income on energy within 12 years if prices continue to rise at their present rate.

  • rate this
    +4

    Comment number 18.

    I'm not sure what the answer to lowering energy prices is, all I know is that they are too expensive for the average household. It's shameful that something so essential to modern living is beyond the reach of so many.

    If we truly lived in a democracy politicians would do something about these issues. Unfortunatly we HAVE to elect one of them, if none of them will help its not really a choice.

  • rate this
    +5

    Comment number 17.

    I agree the energy billionaires are ripping us off, but for 'scrap planning regulations' Cameron to actually do anything meaningful about it would surely risk their donations to the Tories, wouldn't it? Which poliyician really stands up for the ordinary populace?

  • rate this
    +12

    Comment number 16.

    It is a sad indictment of 21st century that none of the private secor have any morals & have to be forced by legislation to not rob the most vunerable members of society. Clearly this needs to be extended to all parts of UK society as no company (& certainly no banks) seem capable of self regulation. State ownership or new heavy handed legislation seems to be the only way

 

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