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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!!!

Profile photo of mark
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.

Profile photo of ChrisGloucester
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.

Profile photo of wavechange
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.

Profile photo of John Ward
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.

Profile photo of wavechange
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.

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Guest

I cannot understand why any charge should apply if the meter has been disconnected.

Maybe this would be a good time to switch your energy company and register only as an electricity customer. It might save you money as well as possible future hassle.

Guest
Gabrielle Hadley says:
24 April 2013

That is the point, if you have a meter even if no loger useable but not removed you can be charged by your previous gas company. Silly I agree but this is a fact and if you live in rented accommodation only your landlord can have the meter removed. With the new bedroom tax this could effect a great many forced into private rented accommodation. I also fear that if you have a single bill this charge could go un-noticed.

Profile photo of wavechange
Guest

I was an e.on customer until recently and their bills are very clear, so I don’t think this could go unnoticed. I cannot speak for other suppliers.

Best of luck in getting this resolved. It seems very unfair.

Profile photo of mark
Guest

I’m glad EON have improved their bills. When I was with them they were very hard to follow and, for one bill, even the billing expert at EON couldn’t make sense of it.

Profile photo of wavechange
Guest

e.on has not always been able to explain why they have put up my monthly direct debit payment when there was a substantial credit on my account. This was helpful when trying to see things from my point of view. 🙂

Guest
Gabrielle Hadley says:
27 April 2013

This is a favourite trick by energy companies, their excuse is that they have estimated that in the next year your use will warrant it and this will save ‘shock billing’. My advise is to phone them and insist your payment remains the same they have to comply. What they want is interest on you money so that they make even more profit and pay themselves even bigger bonuses, tell them to go play on the motorway.

Guest
Dave Clough says:
26 April 2013

I have found OVO energy very clear in their tariffs and in their bills. I fairness I also found my previous supplier EDF energy good, with clear bills and a range of tariffs. Why did I switch? I switched because my annual bill would have gone up by 58% (yes fifty eight percent) if I stayed with EDF.

I do wish that Which? would acknowledge the impact on some consumers, eg me, of pressing for a simple tariff which penalises those of us in rural areas who use only electricity to power our homes as we are off the gas grid. The idea of comparing buying energy with buying petrol and being able to find the cheapest deal is flawed. A litre of petrol costing, for example, £1.40 releases the same amount of energy as one costing £1.42. The energy unit used for the home is the kilowatt.hour (kWh) and electricity users pay much more for each kWh of electrical energy than gas users do for each kWh of energy from gas. Those on the gas grid should have a look at their bills and see what the difference in cost per kWh is for gas and electricity and you will be amazed.

I have seen comments online such as you should reduce your use of electrical energy. I agree we should all do this. However, our total annual use of energy in kWh is well below average for our size of house owing to the use of insulation, draft proofing and most other methods for improving energy efficiency. A couple of simple tariffs sounds like a good idea in principle but it hits those of us who do not have gas as an option. Give those of us in this situation the choice of a tariff with a high standing charge per day and a low cost per kWh of electrical energy. I can imagine the outcry if Which’s “petrol station” idea meant that there was a single cost for energy in kilowatt.hours which would reduce electricity bills and vastly increase gas bills.

Profile photo of wavechange
Guest

There is a very good reason why gas and electricity prices are different per kWh. It reflects the cost of providing these forms of energy.

We all have the choice of where to live. I was intending to move house but abandoned the idea when I found that the area I was looking at has no mains gas.

Profile photo of dave newcastle
Guest

It is time to abolish the need for access to a computer to work out who is offering the best energy deal! Get rid of standing charges they don’t have them in shops (or petrol stations).

Guest
RAB says:
26 April 2013

Can somebody please explain why prepayment meters are not the cheapest form.

PAYMENT IS MADE UPFRONT!

NO BILLS TO PREPARE!

NO METER READERS NEEDED!

IN FACT, NOTHING TO DO AT ALL EXCEPT RECEIVE THE MONEY IN ADVANCE – DODDLE!!

Profile photo of mark
Guest

Because the people who use prepayment meters are the poor and vulnerable and are easier to take advantage of.

Guest
Contax says:
6 July 2013

If the standing charge as stated by Ofgem is forced on us we will end up paying arround 30p to 50p a day, in summer months I go several days with no gas use, I use about 15 kWh per month, in winter months it is high due to heating being on. I was on standing charge and found it expensive so switched to Scottish Power 2 tier (no standing charge) it has worked out much cheaper, I give readings at end of month and get monthly bills paid by direct debit it works great.
I would like to see gas and electric sold by a single kWh rate for each just like petrol and diesel, it would be easy to work out for those who can’t understand bills and when the price increases the percentage increase would be same to all users high and low, up to know it has allways left low users with higher increase than high users which is unfair on the poor, old and disabled. They can still give the discounts for DD, Dual Fuel and Internet Paperless Billing. To compare different suppliers we would only have to compare kWh rate on each fuel, so easy and accurate compared to the old systems 2 tier and standing charge.
I have no trouble working out bills, I read meters daily and keep daily, monthly and yearly records so I can compare each month or year and work out my own DD charge, I can even tie the power suppliers operator in knotts as few of them actually understand how to work out the bills themselves.

Profile photo of mark
Guest

Also energy companies should be forced to include VAT when describing their tariffs. This makes it just that little bit harder to compare tariffs.

Guest
gromit says:
26 April 2013

Welcome to Planet Earth
Where the needs of the Greedy
Are sadly allowed to outweigh
The needs of the needy

They are robbing ————–
and we take it laying down.
whio are the biggest ——————–

Guest
NTN says:
29 April 2013

The People and their Supporters want fair play.
Government rallies to the cause with a fighting speech and drum roll.
Big Bully Business cries ‘foul’ and rolls in pain – Oscar-winning performance.
Government ‘yellow’ (yes!) cards the People.

Banking enquiry recommendations?
Press regulation enquiry recommendations?

See the pattern?

You may well ask who’s in charge?

Guest
gromit says:
30 April 2013

The way forward is to force the companies in question to sell off part of their monoply as soon as they reach a certain point of turnover.

That way fari play may be resumed

We have a minimum wage ?
Big business should have a maximum profit.

This action would probably upset
.000000001 percent of the worlds population.

Roll on when the majority of voters are actually supported by the people they vote for.
Sad world

Guest
L Betts says:
8 May 2013

NPower sells tariffs by phone, namely “fixed until November 2013” and not 3 months later the price went up. When I enquired they denied the tariff was fixed. Of course what is subscribed over the phone is never confirmed in writing. Telephone conversation of this kind should be recorded. How on earth does a customer protect oneself?
And the greatly emphasized “discount” once a year, but only if one pays by DD, is not a discount at all. It is a refund of £100 (for dual fuel) after overcharging for a year and NPower does not pay it back until it has received at least £100 and usually more well in advance. Beware. This is false advertising. And if you are in credit they never send a prompt refund however they put up the DD amount in winter and to get it reduced it takes endless calls, emails and requests.
At the last count NPower had in excess of 30 tariffs, sadly the site no longer provides the list of tariffs but has adopted the system (also used by comparison sites) of filtering any search through post code, current supplier, yearly usage or cost at which point a few tariffs are shown but not all that are in fact available.
Now, this is the same as the insurance companies asking how much was one’s last premium. Why should I disclose such information, so that the price/tariff is tailored to be perhaps just a tiny bit cheaper?
There are no prices any more. It is an auction and no one pays the same, it is a circus.

Guest
George says:
10 May 2013

I have changed energy suppliers four times, of course the tariffs where better and saved me money for a very short while, the last company was EDF and they doubled the price per kw so i moved to NPower and now i do not have a clue what my charges are

Guest
Cath says:
17 May 2013

My last eon joint bill was over 800.00 electric .£470+ gas the rest
I have 3.9 solar system
I live alone
I just do not understand what s going on.
Now every none essential is off I sit at night in my coat and blanket
The word as gone mad.

Profile photo of dave newcastle
Guest

Cath, Are you being billed on the basis of estimated meter readings or actual readings? How many months are covered by the £800 bill?
If you are not already doing so my immediate advice is to start reading both your gas meter and electricity meter on a monthly basis and keep written records carefully. If you can answer the following questions I may be able to give an indication as to whether you are probably being incorrectly billed, Is the property- terraced, semi- or detached and how many bedrooms? Is it a bungalow? Do you have good loft insulation? Do you have cavity wall insulation? Do you have double glazing?

Guest
nissan says:
1 June 2013

Why should we have to pay a daily standing charge ?
Isn`t this just another way of getting more money off customers !

Guest
Robert says:
10 June 2013

When we are all trying to find the lowest energy prices combined with reducing our consumption,
I am very concerned at the increasing daily rates for Standing Charges. It is obvious that energy companies are not content with subtle/devious price increases which are difficult to understand by anyone but a maths expert. They are now hedging their bets to compensate for possible/probable reduced usage levels by unfairly imposing unjustifiable increases in their daily rates for standing charges. These have reached 50p per day in one case while another still charges “as low as” 16p per day. There can be no case for such high standing charges as it is soley to guarantee a fixed level of income and should be based on its true purpose ie. network maintenance etc.

Guest
Contax says:
6 July 2013

If the standing charge as stated by Ofgem is forced on us we will end up paying arround 30p to 50p a day, in summer months I go several days with no gas use, I use about 15 kWh per month, in winter months it is high due to heating being on. I was on standing charge and found it expensive so switched to Scottish Power 2 tier (no standing charge) it has worked out much cheaper, I give readings at end of month and get monthly bills paid by direct debit it works great.
I would like to see gas and electric sold by a single kWh rate for each just like petrol and diesel, it would be easy to work out for those who can’t understand bills and when the price increases the percentage increase would be same to all users high and low, up to know it has allways left low users with higher increase than high users which is unfair on the poor, old and disabled. They can still give the discounts for DD, Dual Fuel and Internet Paperless Billing. To compare different suppliers we would only have to compare kWh rate on each fuel, so easy and accurate compared to the old systems 2 tier and standing charge.
I have no trouble working out bills, I read meters daily and keep daily, monthly and yearly records so I can compare each month or year and work out my own DD charge, I can even tie the power suppliers operator in knotts as few of them actually understand how to work out the bills themselves.

Profile photo of mark
Guest

There is at least one company that offers a tariff with no standing charge, Ebico. I didn’t switch to them because they would have been more expensive for me. For a low user, however, they may be better.

Profile photo of wavechange
Guest

I have recently switched to a Scottish Power dual fuel tariff, thanks to a collective switching scheme run by the local council. These schemes are being arranged by various councils. There is no standing charge on either gas or electricity and I am paying less than I did with e.on.

Guest
Contax says:
22 July 2013

I am with Scottish Power and life has been so easy with them compared to over 5 years with Npower which are hell on earth. I monitor my electric and gas meter readings daily also keep monthly and yearly records so I can compare my usage at any time, I know my maximum usage so I get to say how much my DD is, I always keep my balance in credit. I am all for no standing charges, no 2 tier tarrifs, just sell at at a kWh rate like petrol and diesel are sold by the litre, no extra for delivery and metering. Is Which going to take this up with Ofgem to make the brick brains there see how their standing charge will hit pensioners, single people and low paid families with low usage. EDF have put the idea to Ofgem to go that way if the other suppliers do the same, Ofgem said it would not be suitable for the disabled, I can’t understand why. Can some one start a petition to get the goverment to step in.

Guest
Ina Milne says:
27 February 2016

It should be easy for Ofgem to determine how much the transport and administration cost for gas and electricity around the country comes to. This information should already available from data before these services were privatized