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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.

John Healey says:
23 September 2011

I think we are talking about the wrong solution to this problem. Who wants to be bothered spending time thinking about constantly switching suppliers? What a boring thing to do! Yes the energy suppliers are very clever at thinking up more complicated ways of trying to confuse and dupe consumers into thinking their service costs less than the other fellow’s. Then they all change tariffs again and we are back where we started. This “beneficial competition” has resulted in figures that are now far removed from the actual cost of delivering the energy to our homes.

I still regard gas and electricity supply as a Public Utility duty. We need to go back to one supplier, one tariff. and the tariff should not have making a profit as an objective. The difference from previous ways of doing this must be to ensure that the service is run efficiently and not just to provide jobs for an unnecessary number of public employees. Instead of trying to make switching easier the government, and other politicians, would better represent the will of the people if they concentrated on how they could do this. If they succeeded, we could all forget this issue, not be bothered by pushy sales people and get on with using less energy as a means of saving money.

Steve Hunt says:
23 September 2011

I have since reading this and the other posts changed my approach to this problem or should I say I am now prompted to consider the unthinkable. Whilst non of the contributors have actually said so, they (with the exception of ‘happy energy consumer’) have made a very good case for returning this huge industry back into public ownership. This sounds very right wing old labour in fact! However the reason for the mass nationalization of all heavy industry in the past was the total mismanagement and privateering of unscrupulous owners. The barons as they were called with far too much power in the hands of too few men (does that sound familiar? ) in industries; as you point out which should be a Public Utility duty.Especially as they provide for basic human necessities. Before you move on let me say I am sure this kite won’t fly! However history does have a nasty habit of repeating itself if we fail to learn from the lessons of past mistakes.

In the short term to resolve the current chaos the Government should step in and make it a requirement on all companies providing a public service to publish daily (similar to the stock market) the wholesale and retail cost/charge of energy. These costs to be in an approved uniform format only. A format with which all contractors would have to comply. This daily report could be made available via the Internet and/or phone app or even a special public service TV channel and of course the national news papers.It would cost relatively very little to do this.
If this were to happen we could all see what is going on. Comparison website’s would be for this purpose become unnecessary.What about competition? I hear you cry. We do not have true competition now! Just half a dozen bloated companies fighting for market share for a finite resource and ripping us of in the process. Highly intelligent individuals from numerous disciplines embarrassingly failing miserably to calculate their energy cost or even discover just what tariff they are on! Its an absolute public disgrace. We have made ouselves a laughing stock by allowing it to get this far.

Well put, clear concise and really what any developed country shuold be doing. Lets look after the whole country and the planet and get back to ware we used to be. John P

Donald Morrison says:
23 September 2011

I’m a happy energy consumer since I’m with Co-operative Energy. They only have one tariff and because they are owned by their consumer members I know that they will always give me a fair deal. Also, as a member I get dividend back on my spend. You can find them on the web under “Cooperative Energy”. If you want a fair energy deal from an organisation owned by consumers join me!

Greystoker says:
23 September 2011

Its farcical marketing.Consumers are attracted to what appear to be reasonable tariffs but usually after a year when the contract expires are then placed on a somewhat less attractive tariff.These companies depend on consumers settling down with one supplier after being drawn by an initial attractive tariff.

Instead of Huhne trying to convince the consumer that he is taking action for the consumer by making it easier to switch suppliers (it is already easy enough to switch),he should be looking deep into the formation of energy prices that are being imposed on the consumer.There is little competition between the major companies.They are all vertically integrated companies.The consumer would be better served if the generators of energy were split away from the retailing of energy (both domestic and industrial) to creat a wholesale market.Additionally,there may be a case for spitting up the existing generators of energy to create more competion.

My other complaint is that as an Economy 7 consumer,I am penalised by having to pay a greater kwh day rate to receive a reduced night kwh rate.Economy 7 consumers assist the generator by keeping his plant in use at night when without night load,the generator would be forced into the more expensive operating regimes of shutting down plant and restarting when demand again increases.

I find it easy enough to switch. The question is when and to whom.

Hello Greystoker,
I believe that electricity companies can store electricity, e.g. by pumping it back up hill into a reservoir to drive downstream turbines when demand arisises.
Not much of a consolation but it may help.

One aspect of energy tariffs that really infuriates me is the way providers keep introducing new “versions” of their tariffs. In the last 2 years alone, I have experienced multiple versions of British Gas’s Click Energy tariffs, multiple versions of First Utility’s iSave tariffs, and now multiple versions of E.ON’s SaveOnline tariffs. In one year alone, E.ON has gone from version 3 to version 9 of its SaveOnline tariff. It generally seems to be the case that the most recent versions are the most attractive – designed to be most competitive when using the switching sites. But the providers seem to make no effort to alert their existing customers to the presence of better versions of the tariffs. If anything, they make an effort to play down these tariffs, or make them hard to switch to by the use of cancellation fees and conditional discounts, and by relying on customers not wanting to spend every day of their lives checking to see whether a new and better version of their current tariff has been created.

My most recent experience has been with E.ON. Coming to the end of my 1 year SaveOnline 3 plan, E.ON notified me that I would be automatically moved onto their EnergyOnline plan, a plan on which I would “still get the same great discounts and rewards”, but which, on investigation, would actually cost me 7-8% more in charges than my current plan. In much smaller print, E.ON directed me to their website for other plans if I was not happy with their proposed renewal. On their website, I found SaveOnline 9 advertised. On prompting, E.ON informed me that this plan would be almost 10% cheaper (!) than my current plan. I have my doubts about this claim, but if this is true, then if I had not been on my guard, I would have found myself paying almost 20% more for my energy.

It seems to me that the energy providers design this “versioning” of their tariffs deliberately to disadvantage their existing customers. I can see NO reason for this versioning, other than a hunger for profits at the expense of customers less able to scrutinise continuously their energy charges. I see NO ethically-justifiable reason for offering tariff improvements to new customers without also AUTOMATICALLY providing those same tariff improvements to existing customers. I firmly believe that a provider should not be permitted to offer a better tariff to new customers without being OBLIGED TO apply those same improved tariffs to any existing structurally-equivalent plans. And on expiry of a plan term, a customer should be offered as a renewal option, first and foremost, the best current structurally-equivalent plan – not a 20% more expensive so-called “standard” plan. I’m sure energy providers would work hard to evade such obligations by devising subtle structural differences within their plans, but it should not be beyond the capabilities of a rigorous regulator to stamp out such practices.

My ideal energy supplier – one that has just ONE tariff – the same for all its customers, new or old. I shall certainly be taking a look at Cooperative Energy …

What price loyalty when you are an energy customer?

Have a look at Utility Warehouse Discount Club – Which magazine has once again ranked this company the top in the switch satisfaction survey for value for money, customer service and bills overall. Easy tariff, easy to understand bills and value prices – you will not see them on comparison websites as customers are from recommendations and ‘word of mouth’ I think they are great

Bernard Horton says:
24 September 2011

I recently went on a comparison site to change supplier. Icould not find my SSE tariff listed. I contacted SSE to clarify my tariff and was told ” You need to check each of the ‘BIG SIX’ as comparison sites don’t have the latest information. I didand couldn’t find my tariff as listed on my bills on any site. I believe this is a deliberate attempt to confuse, divert and dissuade customers from switching. I suspect that ALL THE BIG 6 operate similar tactics. Let’s have a bit offair play in this market, it’s long overdue

This is a good test for the Which Switch web site. Is your SSE tariff on there and, if so, did the comparison come up with a better deal?

Peter White says:
25 September 2011

The article in this month’s Which? is very good but alas there does appear an oversight in the calculations you asked individuals in your exams/tests to carry out comparing tariffs. Electricity Tier 1 amounts of 600, 720 or 900 kWh are not in my experience applied on an annual basis but on a quarterly/billing cycle basis so in practice you could have 2400, 2880 or even 3600 kWh charged at the higher Tier 1 rate over a year if you are a high electricity consumer. This makes a very significant difference to actual bills and is even more complicated to model (this really does need a spreadsheet).

Thanks for your comment Peter. We’ve double-checked the tiers or ‘primary blocks’ for the electricity tariffs we used in our tests and the annual figures we used are correct. British Gas, for example, changes the first 180kWh per quarter (720kWh per year) at the Tier 1 and the rest at the Tier 2 rate. It may be that you are thinking of gas tariffs, where the tier thresholds you mention are commonplace (for British Gas it’s 670kWh/quarter or 2680kWh/year).

Robert says:
6 October 2011

I also think that the flowchart for the annual charges for British Gas oversimplify the actual calculation based on the discount conditions quoted in the article, due to the calculations be made separately each quarterly and not cumulatively over the year.

The impact of this will depend on what they mean by “pro rated”. Is this pro rated to time (in which case it could be capped at peak times eg the winter, but not at low times eg during the summer, so the maximum direct debit discount could be reduced)? Or pro rated to average national usage (as I have seen for another supplier)?

Either way, by not allowing cumulative usage over the year to be taken into account for the discount calculation increases the likelihood that you could be restricted by the maximum in some quarters while not getting any at all in other quarters.

On the other hand, if I don’t reach the Tier 1 total in one (or more) quarters, but exceed it in others (and in total), I will be better off than if I had equal usage over the year, as the discount for Tier 2 over Tier 1 is significantly greater than the direct debit discount.

I Rankin says:
26 September 2011

I have had 2 suppliers who use a different factor for Calorific Value
Scottish Hydro 3.9
E.ON 3.6

Although E.ON do not show this on their bill I calculated it from their bill.
This might appear a small factor but in 100 units used it produces a difference of 8.5 Kw Hrs
I must admit I did not notice this until I tried to check my Bill form E.ON and was unable to find the factor used. I then used one from my previous supplier Scottish Hydro. As this gave the wrong answer I calculated the figure E.ON used from their bill.

Is this a common feature or it is it a one off and is it taken into account on Comparison websites.

Robert says:
6 October 2011

Were these 2 factors for the same month?

As I understood it, the calorific value is a nationally calculated figure each month used by all companies. Have I got it wrong?

I commend Which for trying to exert pressure on the energy suppliers to give the customer a fairer deal but wonder if they will have any success.
Most of our main energy suppliers are now owned by foreign companies, they owe no loyalty to Britain and have no interest in giving the consumer a fair deal.
The energy industry operates as a cartel whose aim is to screw the consumer for as much as they possibly can.
The quango that is supposed to regulate the industry is ineffective and viewed by many as cuddling up too closely to the suppliers. Indeed there are former members of the regulator who have moved in with the enemy.
I have switched three times in recent years but have come to the conclusion that there is little point in continuing to do so. They all take turns in being first to adjust rates upwards and all at some stage or other will for a short time be the cheapest option. We are expected to run around like headless chickens chasing them.
We are fast approaching the stage where it might not be considered such a sin to join the criminal fraternity, bypass the meter and get the energy for free.
If the industry doesn’t want that state of affairs to become the norm, they must start giving the consumer a fairer deal in line with that proposed by Which and the regulator must take a much more pro-active stance on behalf to the public.

(1) I am very sceptical that government/OFGEM efforts will achieve anything useful with the possible exception of standard pricing for the standing charge, i.e. x pence per billing day. After all, this is a bit like BT line rental and call charges – why should the two types of charge be muddled?
(2) If the Which Switch web site does provide a comprehensive list of tariffs and a comparison facility between them, then this eventually is indeed an incentive for suppliers to be competitive – but only if we consumers use it. I tried my current supplier’s web site to compare a tariff suggested by the Which Switch web site as being cheaper. The one suggested by Which Switch did not exist in the list of tariffs with my current supplier. In addition, my current supplier asked how many £ I spend and from that works back to kWh. I should enter how many kWh I use.
(3) The cheaper tariff I had found in the small print said that an IGT charge is applicable. On investigating this further I found that the IGT charge my be between £30 and £50. So I dug further and found out that IGT stands for Independent Gas Transporter. My current supplier helpfully provides telephone number 0870 160 0229 (a National Grid helpline) where I found out that my address does not use an independent gas transporter. An IGT charge would have made significant inroads into the savings; people may accidentally click through to switch suppliers and at the end of it all find out that there’s an IGT charge not taken into account by the comparison.
(4) It’s sad that these days you need a computer, internet access and savvy to intelligently deal with these matters. What about people who haven’t got these facilities?

Hi mgp001 – I’m going to ask someone from Which?Switch to have a look at your comment as they’ll be able to reply better than I can to your first points, but in the meantime I just wanted to flag something up in response to your point (4)

You’re right that people shouldn’t need to be technically savvy in order to switch – I think it’s one of the barriers that’s putting off some of the most vulnerable consumers. Which?Switch is trying to solve this problem and has now set up a phone line so people who don’t want to go through the website, or perhaps don’t have internet access can call on 01992 822867 and talk to someone about their bill, who’ll be able to give switching advice over the phone. Hope this is helpful!

Hi mgp001. I work over at Which? Switch so hopefully I can answer some of the questions you’ve raised.

(2) I’m sorry you couldn’t find the tariff you were looking for on our site. Although we try to be comprehensive, energy suppliers don’t always provide us with information about every tariff available for existing customers. It’s also likely that your tariff could be named slightly differently on your bill from how we display it- for instance, what companies refer to as ‘General Domestic’, ‘Monthly Cash/Cheque’ or ‘EnergyPlan’ can all simply mean their Standard tariff. As Nikki said you can call us on 01992 822867 if you’re having difficulties switching with the website. Or, if you email us on wsqueries@which.co.uk our team will be able to help with the problem of finding your tariff.

(3) Customers with an Independent Gas Transporter do indeed as you rightly point out face charges from most energy suppliers. In our ‘current situation’ page, we ask the question of whether you are an IGT customer or not, with a help text to explain what this means to someone who is unsure. We cannot accurately quote IGT customers through Which? Switch, as we don’t have the facility to reflect IGT charges in the prices shown, so we do our best to ensure these customers don’t accidentally switch. In most cases, affected customers will be aware that they are supplied by an IGT as they will already be paying charges to their current supplier.

Thanks for your feeedback- we do our best to make sure the site is clear and easy to use but we’re always looking for areas to improve.

Hello Nikki and Charlie at Which,
Firstly it would have been handy if there were a reply facility within your comments because, as it stands, I’m now going to “reply” to myself to comment on you comments.
1. Nikki:
The telephone alternative to being computer-savvy (and equipped) is very welcome. As a computer user I did not read that far – mea culpa.
2. Charlie:
I seem to have mislead you. The Which Switch web site does have both tariffs, EDF OnlineSaver7 and E.On OnlineSaver10, to name names. The comparison feature worked great and suggested a saving of the order of £90 if I switched to the latter (but this is where a potential IGT charge may come in, though not applicable in my case as I found out: I overlooked or misundersood this on the current situation page). As a check I tried a comparison within the EDF web site where, at least at the time, they had no record of E.On’s OnlineSaver10. And it was EDF who asked me to enter my current consumption in £’s, not kWh, which I fear may lead to inaccuracies. I did not try the reverse test on the E.On web site because it’s all a bit academic for me at the moment as I’m tied to EDF till the end of the year and the EDF prices will go up in November and change the picture.

Hi mgp001, we only have one indent for reply comments, however, you’re right that the reply link should also be included on reply comments – this is something we’re looking into implementing. In the meantime, you have used the reply button correctly. Thanks.

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.

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!

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.

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

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.

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!

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 🙂

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.

Keith says:
8 October 2011

Thank you both for your comments. Unfortunately I have to wait until the end of October for the full years usage.
However, e-on have sent me my total figures up to my last bill in August. so with my present readings I should be able to estimate my years usage.
Thanks once again at least I’m moving in the right direction.
Regards, Keith.

Peter says:
23 October 2011

The proposed Which Simple Energy Tariff would be a huge improvement. I would suggest that the tariff (both the standing charge and unit energy cost) should have to be quoted inclusive of VAT. Also, I think the standing charge should be quoted per annum, with 1/4 of this figure added to each quarterly bill. The small errors caused by the variable number of days in a quarter should simply be averaged out (and ignored) by the energy companies. These additional changes would make matters even simpler.