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Confusing energy prices – Ofgem’s plans are not the answer

Calling for a single unit price

Energy prices are too confusing. The government and Ofgem must sort this mess out by forcing energy companies to present their prices in a clear, simple way.

Six months ago David Cameron stood up in the House of Commons and made a bold commitment that took everyone by surprise.

After yet another round of inflation-busting price rises by the big energy companies, he promised to intervene and legislate so that energy companies have to give the lowest tariff to their customers.

Tomorrow the energy regulator, Ofgem, closes its consultation on these plans. But our new analysis has shown that unless these proposals are improved, more than 3.4 million households could end up paying over the odds for their energy as they still struggle to identify the cheapest energy tariffs.

Ofgem’s plans could cost millions

Ofgem claims to have a solution with its new ‘Tariff Comparison Rate’. But this APR-style metric will only tell customers the representative price for a medium user of both gas and electricity.

Given only a quarter of British households actually use this level of energy, that leaves three quarters of people making price comparisons based on the wrong numbers. And that could leave millions opting for an unnecessarily expensive energy deal, resulting in people collectively paying an extra £55m on their bills.

For years consumers have had to deal with ridiculously complex and confusing energy prices and tariffs, with nine out of 10 people unable to work out the cheapest tariff in our own investigation. Most of us have never switched supplier, while for those that have switched, the confusing way energy is priced has led to many choosing the wrong deal.

With escalating energy prices remaining a top financial problem for households we hoped the government and Ofgem would sort this mess out by forcing all energy companies to present their prices in a clear, simple way and to make it much easier to switch.

While it’s good that Ofgem has told companies to reduce the number of tariffs they offer, its plans don’t tackle the barriers to switching. As a result it’s likely customers will be put on the best of a limited choice of deals with their current supplier, rather than being able to find the best possible deal across the energy market.

Simple energy prices will save money

Which? campaign for single unit prices in energyThat’s why Which? wants the government to step in and legislate to require single unit prices for each energy tariff, in the same way that petrol prices are displayed on the garage forecourt, so that people can easily compare between suppliers to find the cheapest possible deal for them.

It should also make a new rule that suppliers must take no more than one week to switch customers, instead of the current slow shambles that often puts potential switchers off.

This could finally inject much-needed competition into the broken energy market, firmly putting the consumer in the driving seat. But for that to happen we need a regulator that really listens to consumers. Don’t hold your breath.

Comments
Guest
Lilly Prestidge says:
22 April 2013

2 adults 1 6yr old- a few showers a day, the only electrical item on during the day is fridge freezer! Electric gets used mostly after 5pm- economy 7 heating, £167.00 direct debit a month!! Not to mention the £480 bill in debt from last quarter- CRIMINAL- bill is not easy to understand whatsoever!!!

Guest

There’s no doubt that the energy market is a real mess. It was easier when we only had one supplier. I am not sure that any of the new proposals are adequate. Right now energy companies employ a range of tactics to ensure that no-one can make sense of the tariffs: confusing bills, complex discounts, umpteen different tariffs, irregular billing, estimated readings, inflexible payment terms etc. ALL of these need tackling if we are to make any progress here.

At the very least suppliers should have to publish all their tariffs in a clear and concise manner and ensure bills are consistent and clear.

Guest

Bravo “which” you’re starting to sound like some of the comments I’ve been making for some time.
All I would add to the above is get rid of standing charges and comparing energy supply prices could not be easier.
Could it be bye bye smoke and mirrors energy marketing hello a system everyone can understand?
Don’t hold your breath just yet, the evil energy empire might strike back.

Guest

Keep up the good work, Which? Chris has already mentioned getting rid of standing charges, so there’s no need to mention that.

Let’s have simple prices for energy and scrap the plans for smart meters. If anyone would like a smart meter, that’s fine providing they pay for it.

Guest

I totally agree with Wavechange’s comments, especially the abolition of standing charges [which goes without saying]. It would be helpful if there were just three or four standardised tariffs, with uniform nomenclature, across all suppliers. That would enable easy comparisons to be made. For customers with special requirements they could build on the ‘plain vanilla’ tariffs and add fancy toppings, bundle them, wrap them in a budget plan, and give them funny names, but the standard tariffs would be the key to fairly comparing the market for the majority of consumers. Surely, a set of standardised tariffs is the simplest way to promote real competition in this impenetrable service industry; I thought that was the government’s objective.

Guest

Inspired by John’s comments, I suggest that energy suppliers could compete by offering discounts on energy when there is a surplus, perhaps on days when the wind turbines are turning and those with solar panels are feeding their surplus into the grid. Whatever system is used to achieve this, it would have to be very simple to help consumers make meaningful comparisons between companies.

Guest
Paul Bradbury says:
23 April 2013

My energy supplier First Utility has today advised me that my tariff is changing and it will result in a cost increaser of 18.6%%!! Also they said that it wasn’t the cheapest tariff Why. I thought that Cameron said we would get the best deal

Guest
Gabrielle Hadley says:
24 April 2013

Although I stopped using gas five years ago Eon has continued to read my meter (which is no longer connected to the mains) and send me zero bills. Imagine my surprise today to receive a bill for £24.44 standing charge. Of course, I telephoned them only to be told that although they knew I no longer used gas they were now forced to charge a standing charge, after I turned exploded they agreed to phone me back which they did. This complaint was then passed over to a senior advisor who agreed that as I am over 60 they would remove the standing charge. This has saved me but others need to be warned. If you live in rented accommodation you are at risk even if you do not use gas.