How can consumers choose the right tariff when there are almost 400 to compare? The market is currently far too confusing, which is why we need to put pressure on Ofgem to tackle tariffs.
The Energy and Climate Change Select Committee, which I chair, published a report in July on the activities of energy companies.
This was in light of Ofgem’s proposal to improve ‘tariff comparability’ and make it simple for people to compare prices and choose a better deal.
Too many tariffs, too little clarity
In the last 18 months the number of tariffs available to consumers has increased from around 180 to almost 400. It is clear that the complexity of these tariffs limit the ability of consumers to engage effectively with the electricity market.
Indeed Charles Hendry, the Minister of State for Energy, told us that when he went online to compare tariffs he was so confused by the options that he decided to stick where he was.
Coaxed into switching
My committee colleagues and I have also become increasingly concerned about the doorstep selling techniques of the large energy companies. I suggested that energy companies should pay compensation if it turned out that consumers were being persuaded to switch contracts when it wasn’t in their best interests.
Although during our evidence session with some of the big energy companies they did not agree with this idea, I’m encouraged that three of them have since announced they are disbanding their door-to-door sales forces. If tariffs were more understandable, mis-selling would not be such an issue.
Time to take action
The industry must address the level of tariff complexity and mis-selling immediately without waiting for either Ofgem or government to act. However Ofgem needs to take much tighter control of these issues so that consumers have the ability and confidence to take part in switching, which is essential for real competition.
Which?’s investigation further confirms the problems that consumers face in understanding tariffs and how they struggle to get the best deals. I hope that people will back their campaign and email Ofgem to ask them to tackle tariffs – this will demonstrate to the regulator the strength of feeling on this issue.
With energy prices rising across the board, energy companies must give customers the information they need to choose the correct contract for them. If companies do not make any movement on this issue then my committee will revisit the subject this autumn. We will also continue to hold the regulator and government to account on the progress made in tackling these pressing issues.