New 'protected tariff' proposed to force energy companies to stop overcharging the vulnerable

10 September 2015

energyWe all know that energy companies have been taking the Michael for years, a view confirmed by the CMA in a report earlier this year. However, there are now calls to take thing a little further, and to force the energy companies to have a more reasonable default tariff to protect the vunerable and the 'sticky' (non-switchers).

Shadow energy secretary Caroline Flint is now calling on the government to introduce a protected energy tariff for vulnerable customers as a more robust response to investigations of overcharging in the energy industry.The tariff would be set by the regulator and target those least likely to switch tariff.

Earlier this year that the independent Competition and Markets Authority (CMA) concluded that households were being overcharged by £1bn a year, but the only action the government had taken was to write a letter the big six energy companies, a letter mostly shrouded in freedom of information exemption secrecy.

The CMA claimed the big six had been making more than £1bn a year by overcharging 70% of customers who are on the standard variable tariff, suggesting in July that a transitional regulated safeguard tariff could protect consumers while the energy market is fixed.

The groups least likely to switch are also the most vulnerable and include those on low incomes, who have low qualifications, who are living in rented accommodation, and those who are above 65. CMA research showed 35% of those whose household incomes were above £36,000 had switched supplier in the last three years, compared with 20% of those whose household incomes were below £18,000.

Flint’s proposals suggest a protected tariff model where each supplier must offer one tariff where the price is set by the regulator and any prices changes must be approved by them. This becomes the default tariff for vulnerable consumers, or consumers who do not switch. Suppliers are, however, free to offer other tariffs at a price of their determining.

Instead of being a price cap, as in pre-privatisation days, Flint argues that this model would act as a price to beat for competitors, delivering choice for those that want it while ensuring fair prices for those who do not engage.

So what do you think? Is this a good idea, or is more regulation and price competitiveness at the not-bothered-about-switching end going to automatically result in price rises for those of us who do switch and save?

 

TOPICS:   Utilities

3 comments

  • Dave
    Why must there be this kind of protection for idiots? If you think the price for something is too high, buy from somewhere cheaper!
  • chewies g.
    This isn't protecting the vulnerable, this is making the cheap tariffs for those who can be arsed to switch more expensive! Well... If it works anyway, chances are that a government imposed tariff will be more expensive than most of the cheap ones anyway. And while I'm at it, all that stuff about the energy saving home improvement stuff not saving energy, not saving energy, did anyone check to see if the homes were actually being kept warmer now that they were more insulated??
  • Bev
    What an absolute Moran calling people idiots for not switching,they are talking about the elderly or vulnerable people who are not computer savvy or unable to speak or hear on a telephone .....IDIOT

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