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Limited energy tariffs doesn’t mean limited prices

Energy tariffs: large cooling towers at a power station

Last month, the Prime Minister stunned the media, the energy industry and even some of his cabinet colleagues. He promised to legislate so that energy companies have to give the lowest tariff to their customers.

The announcement was quickly branded as a shambles. Had the PM even meant to make this commitment? Did he get his facts right? And was the commitment possible? The general public were less sceptical. When we asked you on Facebook whether he should keep his promise, a whopping 97% said yes.

From what we’ve read and heard today, it sounds like the government has tried very hard to deliver the PM’s plan. Its proposal is to build on Ofgem’s recent suggestion that each energy company should only have four tariffs per fuel. It will then legislate so that of these four tariffs, one has to be a fixed price, fixed term deal and one will have to be a standard variable deal.

And they will scrap so-called ‘dead’ tariffs – the huge array of old deals in the energy market that people sit on, often paying much more than they should. People on these deals will be migrated across to the new offerings.

Clear, fair and easy to compare

Around three quarters of us are on standard variable tariffs, so this plan should ensure that we’re put on to our suppliers’ best deal for us. The only way we could get a better deal would be if a fixed term tariff was cheaper, or by switching to a cheaper deal with a rival company.

This seems like a neat fix. But, and it is a big but, on its own it will not lead to more effective competition between energy suppliers or drive down prices. So the government needs to go even further. It needs to ensure that energy prices are presented in a clear, consistent and simple way.

It’s blindingly obvious if you shop around for petrol, whether one garage is cheaper than another. But we all know that’s not the case with gas and electricity. Our recent investigation found that only one in 10 were able to identify the cheapest deal when presented with a range of standard energy tariffs.

Rebuilding customer confidence

We want people to be confident that this new cheapest tariff is not only the best deal from their supplier, but that it also compares well with other deals across the market. People must be able to see the cheapest tariff at a glance. This should also put more pressure on energy prices, since customers are more likely to leave a supplier if they can easily spot a better deal from their competitors.

So the government must legislate for a simple, single unit price for energy that will be applied to all tariffs. And more must be done to make sure the cheapest price is also a fair price.

Recent inflation-busting energy bill hikes, profit announcements and accusations of market manipulation have left people questioning whether they’re paying a fair price for their energy. That’s why we need the government to launch an urgent and swift independent review in to what’s really behind the rising cost of energy.

Comments
Guest
Andy Hayes says:
9 April 2013

I am also a user of the Scottish Hydro THTC system. SH have a monopoly on this Tariff, they say that you can go elsewhere but it will cost you more! My cost increased by 22.9% in Oct 2012.
The THTC system means that SH determine when they top up your system through a telemeter. They can switch on and off the ‘lower’ tariff that is used to charge your heaters. So they should only draw from the lower rate. Not sure that fitting additional timeswitches, if possible, would help. It my reduce the amount of electricity used but would also reduce the amount of heat availble. I have an ongoing campaign trying to get Scottish Hydro (SSE) to explain why the rise in the THTC is disproportionate to the standard tariff. I have been through their complaints system, the Ombusman ( who won’t deal with commercial matters) and it has been taken up my my local MP Sir Robert Smith. SH appear to either not have an explanation or unwilling to give me the answer. I suggest you write to your MP about the issue. There are many people in the same position, the more who complain the more chance of a solution. Dimplex have a new storage heater, Quantum, it is new technology and claims to reduced costs by 25%.

Guest
Flossy says:
9 April 2013

I emailed ScotHydro to request that they put me on a cheaper tariff— they answered ” On THTC there is only one tariff “—!!!!!!! Is this true??? And how can they get away with it ?? When I went to their website it mentioned “Discounted Energy”—why don’t they put us on that?? Fed up .

Guest
Derek H says:
9 April 2013

Sorry, but what’s the problem ? So there’s a single tariff. If it’s no good then switch to another provider with a better tariff using any one, or ideally check out a few, of the comparison websites. It’s not rocket science. We have, like it or not and courtesy of Margaret Thatcher no less, a competitive market and though that’s not something which I find ideal, given that it’s there then use it.

Guest
Andy Hayes says:
9 April 2013

Sorry Derek but I have been down that route, see above. THTC is a monopoly tariff. You can switch but it is guaranteed to cost you more and you will probably have equipment and wiring costs on top.
So where is the sense in switching!

Guest
Derek H says:
9 April 2013

No sorry, you are wrong. See for example:

http://forums.moneysavingexpert.com/showthread.php?t=1128773

It can be done, if you’ve got the will !!

Guest
Andy Hayes says:
9 April 2013

Hi Derek
I don’t know how this works as the new supplier has to have control of the telemetry switching.

Guest
albe says:
9 April 2013

If only that was true.

Unfortunately what we have courtesy of M Thatcher is an essentially rigged market where all providers will offer expensive tariffs (as there lowest tariff) to feed the greed of shareholders.

Also – under this new regime, the afternoon boost on electric heating tariffs is likely to disappear, meaning expensive on peak electricity will be needed to heat houses without an alternative fuel in the afternoon and evening.

Guest
Flossy says:
9 April 2013

Tried web page Derek quoted but seems chancy to go ahead with something that we don’t know worked out cheaper–as the guy did not return to post the outcome of his switch—Will HAPPILY switch if it would definitely work out cheaper—- Has Anyone out there done the switch from SH– and what costs did it entail– wiring etc??? Please help 2 cold pensioners???