New energy tariffs- is change a good thing?

21 November 2012

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?

TOPICS:   Utilities   Government

10 comments

  • Tim B.
    If everyone has to go on the 'cheapest available' tariff, why do they need four?
  • James F.
    precisely Tim, they don't need 4. also they have been given 2 years from now (basically) to implement it and get the change done. why cant they do it within the next 6 months!
  • sailor s.
    Of course it is you muppets! My bill has gone up by 100% in 5 years. Got a lovely email announcing these rises saying well we did reduce our prices by 5% last time. it was 25% last time this time itr's only 15% yippee! Whilst they can confusticate us using little known random tarrifs x amount over there normal tariff as a total average of all tariffs we can not see price rises in any real meaningful way. We've also been saying for years that especially in the gas market companies buy in advance! So you switch then that company has to buy the gas of the company you've left. You think that they give it away with out the usual x amount on top? Look flying pigs \o/ Until we get a regulated/simplified price structure we will never see how much it's going up year on year! Right back to fat blokes hula hooping :D
  • james d.
    Here's a crazy idea sam, if you don't like the price try switching. I switch all the time picking up a nice chunk of quidco every time. The market isn't competitive because people like you don't change. If your customer's don't leave when you raise prices then they will keep raising prices. But nooo just cry "I can't spend 10 minutes changing my energy provider someone make a law so I don't have to."
  • sailor s.
    Right maths 101 There are 10 pieces of pie. I buy 5 pieces for the customers I have now a year in advance. Each piece of pie costs me £1 20% of my pie base leave for a cheaper deal. I now have to sell my pre bought piece of pie (that I own) to the person my pie traitors have left too. It's cost me 20p to administer that pie piece so how much on the resale market do I charge for that piece of pie? Well it's original price + admin costs + profit I would have made. This is now the new price of pie! Rinse repeat and wonder why you are encouraged to change as often as possible! That's how the gas re-sale market works \o/
  • james d.
    that makes no sense, why would other companies buy gas for less than they can sell it to others. Even if they had to that would assume there is greater demand for gas then there is supply which there isn't.
  • Spencer
    one word. ebico your welcome.
  • Spencer
    no contracts, no tie in's, no standing charges, and best of all...they're non profit. 1 tariff.... 1 rate... and almost always cheaper than any other supplier. very straightforward, simple and saves me a lot of cash (according to uswitch 11% cheaper than next best tariff) well worth 3mins to check.
  • Loafer1946
    Scottish Power already had four tariffs when I signed up a month ago. I saved myself about 2% on what it would have gone up to - great discount. Another thing how come the cost per kwh of energy is buried in the website in a pdf file, why don't they quote it up front instead of talking about low high users etc. My payments have also doubled in five years and I am using less energy. Ebico was no cheaper by the way.
  • Mark H.
    Just done a comparison and Ebico are £300 more expensive for me than my recent EDF fixed deal.

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