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Energy bills: Automatic switching plan for fairer tariffs

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Consumers could be automatically switched to better value energy tariffs under a plan to make the system fairer.

The government says it wants to stop suppliers putting loyal customers on to the worst deals when their current contracts come to an end.

It will be part of a wider plan to create a greener energy system, due to be unveiled next week.

But one switching site warned the tariff proposals risked "lulling people into a false sense of security".

According to some estimates, millions of households are currently stuck on their energy supplier's standard variable tariff, likely paying hundreds of pounds more than they should be.

The government says it wants to crack down on this so-called "loyalty penalty" through two possible routes it plans to test:

  • Opt-in switching - where consumers are offered a simple method of switching to a cheaper tariff if their initial contract has ended
  • Or opt-out switching - where, unless they choose not to be, consumers are automatically switched to a competitive new contract if their initial contract has ended

"We do not believe that energy companies should be able to roll over contracts indefinitely or punish long standing, loyal customers," a Whitehall source said.

"That's why we're going to make it even easier for people to switch to cheaper tariffs and drive down bills so they can keep more money in their back pocket."

  • Households face £21 rise in energy bills in 2021

Switching website comparethemarket.com said the plans could offer a "radical shake-up" of the energy system which "could be hugely beneficial" for many households.

But Peter Earl, head of energy at the site, said he was sceptical about an opt in/opt out system for switching tariffs with the same supplier.

"It might detract people from shopping around for a better deal with alternative and more competitive suppliers," he said.

"If these changes are not implemented properly they risk lulling people into a false sense of security that they are on the cheapest tariff, despite better offers being available elsewhere."

Green energy shake-up

The government will also offer further protections for vulnerable energy customers, with the Warm Home Discount Scheme set to be extended to 2026 to cover an extra 750,000 households.

It means nearly three million households would be eligible for the discount which cuts the electricity bills of eligible pensioners and low-income households by £140.

The proposals are part of a new plan to make Britain's energy system greener as the country tries to become carbon neutral by 2050.

It is expected to see major investment in offshore wind, clean hydrogen, carbon capture and storage and advanced nuclear.

A Whitehall source said this would support up to 220,000 high-skilled jobs in the UK's "industrial heartlands".

Related Topics

  • Ofgem
  • Electricity pricing
  • Electricity
  • Energy industry

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