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.