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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.

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.

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