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Customers on "poor value" out-of-date tariffs, who are paying a higher rate than their supplier's cheapest standard tariff, will be switched to the cheaper rate.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  • Expensive, out-of-date "dead tariffs" will be banned, with customers switched to their supplier's cheapest standard tariff.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'Out-of-date'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
    +3

    Comment number 895.

    "Bastiat
    U believe what u believe.
    I want my countryman to have freedom, choice & opportunity, not forced conformity."

    You do love your strawmen, false dichotomies and syllogistic fallacies don't you.

    Please get it through your thick anarchist head: the fact people disagree with you is not evidence they want the exact opposite of what you want. Got it yet?

  • rate this
    +4

    Comment number 894.

    @888.Bastiat: Please imagine the government is a private corp. where every citizen has an equal share. It has a proprietary interest in everything which goes on in the country, so you have an obligation to pay for various transactions within its jurisdiction ("tax").

    Sure, you never signed a contract with the government, but that doesn't make its property yours. Respect state property or leave.

  • rate this
    +8

    Comment number 893.

    Wholesale prices go up and down ... government tells them to put people on cheapest tariff .... result?

    Prices only go up and up and the cheapest tariffs now end up being more expensive!

    Nice to see privatisation of a required utility with a captive market working so well .... (for the energy companies)

    Thanks so much tories for selling off all the companies we owned

  • rate this
    +3

    Comment number 892.

    874.Bastiat

    You need to read some Adam Smith, skills have been eroded in the rush for cheaper 'labor'. "Pin factories". Total nonsense that the owners of the means of production will pay more for 'skills' aka Henry Ford.

    888.Bastiat

    Sick people don't work, and pay taxes, id say the NHS has been rather successful. Now name one successful "classical liberal" economy. Fail!

  • rate this
    0

    Comment number 891.

    873.Andy The Thinker

    "Re-nationalise and stop people making a profit from misery"


    Alternatively:-


    Re-nationalise, stop companies paying Corporation Tax, and incrase misery for everyone

    881.inqa

    "The Soviet nomenklatura didn't want for anything either"

    Yes, I have more money today, but you'll have to explain why this puts me on a par with elite Soviets!

    Apologies if I misunderstood

  • rate this
    +4

    Comment number 890.

    Making it simple or not were still paying way too much for it.

  • rate this
    +3

    Comment number 889.

    All the energy cartel will do is comply with the new law but raise prices again to protect their massive profits

    What we need is a proper regulator with teeth to investigate these companies and bring criminal charges against managers and executives who are blatantly profiteering while the rest of us have to tighten our belts. Financial penalties obviously aren't working so we need something else

  • rate this
    -8

    Comment number 888.

    @864. Sixp
    U believe what u believe.
    I want my countryman to have freedom, choice & opportunity, not forced conformity.


    @867.koolkarmauk
    "...NHS. The envy of the world."
    -
    Says who? Michael Moore? Nothing is free. To pay for this socialist, insolvent & immoral dream we're borrowing like a problem gambler, putting our unborn kiddies into debt. Our "legacy" is this: http://www.debtbombshell.com

  • rate this
    +9

    Comment number 887.

    This should be seen as what it is, an improvement on what we've had for years, but it's only the first step. Alongside the private companies we need a nationalised company that can create competition by keeping it's prices as low as possible with no share holders. It's the only way to stop the other energy collaberating to keep prices high.

  • rate this
    +4

    Comment number 886.

    #874 - Bastiat - "he will have an incentive to keep me happy or risk losing me to his competition."
    You don't really believe that, do you?
    He has got a new worker on less pay, probably less in-work benefits such as sick-pay, holiday entitlement and pension!
    His new trainee will be subsidised by Govt and be 2 years before he can claim unfair dismissal!

  • rate this
    +4

    Comment number 885.

    This is Nero fiddling whilst Rome burns. Energy firms have drastically increased their profits, and I suspect many Tories will be making a quick buck from their investments. What is needed is policy to improve energy efficiency, thereby saving money and environment. However this is a long term strategy, and politicians seem incapable of seeing beyond the lifetime of the current parliament.

  • rate this
    +5

    Comment number 884.

    Make standing charges illegal.

    The poorer customers pay disproportionately more than richer customers for each unit of fuel used......in effect, a subsidy by the poor of the rich.

    I actually wrote to my MP on this and he passed back a response from the energy minister......the Tories have no problem with the system of standing charges.

    Wonder why not?

  • Comment number 883.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +5

    Comment number 882.

    875 rightscottish

    You're being had. Direct debit schemes are a con designed to ease their cash flow at your expense. You're banking with them (you're in credit) and still they try for more. They benefit having your cash and say you have a good deal as you are on a lower tarriff? But are you really that better off? Soon we won't be able to choose. We'll all be on expensive d/d tarrifs.

  • rate this
    +3

    Comment number 881.

    @862.WunderfulBBC:
    Greece has had some of the longest working hours in Europe, Germany the lowest.

    Moody's is irrelevant - a vague indicator not useful for making any real investment decisions (see also 2008).

    @877.WunderfulBBC: If you think there was a lack of everything in the '60s vs today then you simply have a lot more money. The Soviet nomenklatura didn't want for anything either.

  • rate this
    +1

    Comment number 880.

    sorry, no more than 1 tariff! I wouldn't go into Tesco and have 2 mars bars on the shelf, 1 priced at 50p and another at 75p. then I could choose???!!!

  • rate this
    +3

    Comment number 879.

    Well we all want obviously the lowest tariff surely? What will this useless government come up with next? How about half the population hibernate for six months of the year, that might help them. You can wake me up when they have gone.

  • rate this
    +2

    Comment number 878.

    If the Government took off the Gordon Brown tax we'd all be 10% better off. I doubt very much that the Treasury uses the funds to actually fight global warming?

  • rate this
    -3

    Comment number 877.

    865.inqa - "We need ...the solid social democracy of the 50s and 60s, when Britain was last Great"

    I lived through those "Great" decades and there was nothing great about the rationing, austerity and general lack of everything.

    864.Sixp - "Nationalised Utilities offered a cheap, reliable, quality SERVICE to the nation".

    I don't think of quality or reliable but I don;t have red-tinted glasses

  • Comment number 876.

    This comment was removed because the moderators found it broke the house rules. Explain.

 

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