New energy tariffs- is change a good thing?
David Cameron surprised MPs recently when he started wittering on about forcing energy companies to offer better or clearer tariffs, as they clearly didn’t know what he was talking about. Now, however, the team have had time to have a little chat, and have come up with a foolproof plan on how to make energy bills better for all of us. Or so they say.
The ‘simplification’ plans will mean that energy companies will only be able to offer 4 tariffs, including one fixed-term fixed rate and one variable tariff. The other two can be dependent on other factors like payment method or environmentally friendliness. The four tariffs must have a single price, but suppliers may still apply duel fuel or direct debit type discount.
But perhaps more importantly, especially for those lazy bones who never bother to switch, minister also plan to force energy suppliers to automatically transfer customers to the most suitable tariff for them, and by that, they mean the one that costs the least. Anyone would think the energy industry was nationalised…
Some quarters have welcomed the plans, suggesting it is the best way to get better deals for most people: “A decade of competition in energy supply has struggled to deliver a market that serves the interests of most energy consumers. The proliferation of energy tariffs was always irrational and confusing for what is basically a simple, homogenous product. It has tended to benefit a minority of very active and determined switchers, and neglected the majority of less engaged energy consumers who are utterly confused, “ complained Adam Scorer, Director of Policy at Consumer Focus.
“Reducing the number of tariffs for each supplier would still provide enough space for suppliers to compete, and would make it easier for more consumers to engage and exercise informed choice. It is a sensible move and suppliers could do it now,” he added.
Energy Secretary Ed 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. The government wants customers placed on the cheapest available price by summer 2014 at the latest.
He also pooh-poohed suggestions that the plans would mean fewer people would look to switch: "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."
But what many people are concerned about is whether the very-prescriptive plans laid down by the Government will actually cause prices to rise overall, as lack of competition hits the best deals.
“Competition in the energy market remains vitally important if we are to try and keep prices down. While the intention from the reported Government plans seems to be to help those many people who have never switched to get a cheaper deal, the devil will be in the detail,” said Clare Francis from Moneysupermarket.com.
“There’s a danger that forcing energy companies to offer everyone their ‘best’ tariff could mean that they simply remove the best, or more ‘niche’ tariffs from the market, stifling competition. There could be little incentive for energy companies to try and shake up their offerings to attract new customers or to retain existing customers, which would be an outcome we imagine the Government is not attempting to achieve.”
So what do you think? Should we all be squeezed into a four-sizes-fit-all tariff to benefit those who can’t be bothered? Or is Dave just a pesky meddler?