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Tim Yeo: I’m with Which? – let’s simplify energy tariffs

Happy people holding big blank billboard.

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.

Comments
Guest

I recently experienced the total confusion and frustration of trying to calculate my electricity bill, following several estimated bills from SSE. I couldn’t even ascertain which of their own tariffs was the best rate out of their dozen or so offered. So I did a survey of all the comparison websites. In the end I Switched with Which? to Good Energy South-West. Not the cheapest, but a simple tariff structure, like Co-operative Energy, and all from 100% renewables.

Guest

I have changed Energy Companies many times now in order to get the best prices, and, yes, the charges can be confusing. However, we are paying a supplement to the Green Energy Lobby in order that this Government can bolster wind, sea, and thermal power sources quickly! That is where our money is going, along with the over inflated pay and bonus structure of Company Executives!

Guest
GeeWizzz says:
30 September 2011

British Gas prices soar. They need to because of their costs they say. But if that was so how come their profits have soared too? And how come (if their need to increase were genuine) when I told them I could change my supplier from them and their ‘cheapest deal’, pay their surcharge for ending the contract early, and still be considerably better off, they suddenly found they could offer me a reduction of £75 ! ! !
For Privatization read GREED and re-Nationalize.

Guest

You point out well my biggest complaint.
Why are the energy companies allowed to charge customers £30 -£60
ending a contract early ? Greed

Guest
keith cleves says:
30 September 2011

I’ve read many of the comments above with interest from people who are very knowlegeable.
So please forgive me if the comment I make has already been covered.
I also “as a layman have tried to wade my way through the many offers made by the energy companies, and it might be that the way I approach the problem is “flawed”.But what I have done is worked out my average consumption for a quarter on dual fuel and given the exact same figures to each company then asked each company I have contacted to give me a bottom line cost for my dual fuel including all incentives etc. So for me the company that costs me the least on my quarterly bill I give the contract to.
I won’t believe that somebody more knowledgeable than myself hasn’t already tried this so I would welcome comments from Which or anyone else who may be able to put me wright.

Guest
Robert says:
6 October 2011

I think you are on the right lines, but you are better off using full annual consumption figures, rather estimating a monthly figure from one quarter, as quarterly figures during the summer can be very different to those during the winter!

Guest

Hi Keith,

Robert is right- what you’ve done is correct but you will always get a more accurate quote by using annual figures, as that way you will take into account increased winter usage. Of course, Which? Switch could have done the legwork for you as we feature both the major suppliers and the smaller ones 🙂

Guest
snori says:
3 November 2011

Like Keith I have just turned the tables on my utility by emailing them a request to send me details of their cheapest tariff for my gas consumption – this puts the onus on them to waste their time calculating the endless permutations. If they get it wrong, I have written evidence to present to the Energy Ombudsman / Ofgem / the media etc.

I use very little gas in the summer and have discovered that a “No Standing Charge” (NSC) option has saved me about £50 in gas costs this past year relative to the comparable “Standing Charge” option. I pay more for each kWh used (in any given quarter) up to a certain usage (Block A units) after which the p/kWh is the same as the Standing Charge option. With Scottish & Southern Energy this NSC kWh surcharge exactly offsets the quarterly Standing Charge so, even if I use more than the Block A units in any quarter, I am always better off on the NSC tariff. Strangely, SSE argue that this is not true but I am still waiting for them to provide me with an example of how this cannot be the case. I’m currently awaiting compensation for 6 years of inaccurate advice from SSE following a successful Energy Ombudsman case!

My purpose in posting here is to highlight the fact that you cannot simply compare annual tariffs from the different utilities – you have to consider your quarterly usage. Be aware that most of the cost comparison sites only consider annual usage data so may not highlight any savings to be made by switching to an NSC tariff.