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A big week for energy – and the battle continues

Newspaper and coffee

What a week. The Prime Minister promised energy companies would be forced to give customers their lowest tariff; Parliament scheduled urgent questions; and Ofgem promised to reform energy tariffs.

We’ve been campaigning on energy for a number of years, so we’re delighted that our demand to tackle tariffs has finally made it to the top of the political agenda and newspaper front pages.

Our executive director Richard Lloyd wrote to the Prime Minister earlier this week calling for an urgent independent review of rising energy prices to help us determine whether the energy companies’ reasons are justified. And as we tuned in to watch Prime Minister’s Questions we were bowled over by his bold commitment.

Prime Minister should keep his promise

Now some commentators are happily branding the government’s commitments to get people on to the lowest energy tariffs as a ‘shambles’. But I’m sure the rest of us will be delighted to see the PM acknowledging that the energy market is not working for consumers – and that he’s committed to making sure we all get the best deal.

His promise has since been followed up with new commitments from the energy regulator, Ofgem. It has promised to simplify the bewildering array of complex and confusing energy tariffs. And it’s come up with proposals that may make it easier to find the cheapest deal.

Thousands of you got behind our call for Ofgem to tackle tariffs, emailing its chief executive to demand action. And Ofgem has admitted that it has gone further with their tariff proposals due to your pressure – so a big thank you from me and all of our energy team.

Keeping the pressure on

We also know that there is still work to be done. Firstly, we need to make sure that the pressure is kept on the politicians and regulator to act. We want no rowing back from the promises made in Parliament. We ran a quick poll on Facebook to find out if you thought David Cameron should keep his promise and so far the vast majority of you have said yes.

Next up, we need to make sure that the detail of these commitments is worked through. One of the key things for us is the ability for you to compare energy tariffs at a glance by quickly looking at the unit price and immediately finding the cheapest.

So the key questions are – will Ofgem’s proposals really allow us to quickly compare deals? And will the PM’s promise mean that we all get the best deal?

We’ll be studying every consultation document and piece of legislation to make sure that the final proposals stack up and are in our interest. And if they aren’t, we’ll keep campaigning until they get it right.

Fair prices we can trust

Finally, we know that this is still only one part of creating an energy market that really works for consumers. That is, a market that gives us fair prices we can trust.

We’ve called the events of the last week – ‘big moments’, ‘big statements and ‘big step forwards’, but the battle for a better energy market doesn’t end here. This is a golden opportunity to secure changes that Which? has been campaigning on for years – let’s hope the politicians and the regulator can now deliver.

Comments
Alan says:
25 October 2012

I have just discovered another crafty move by British Gas. I decided to opt for their cheapest tariff, and then discovered that as an over 85 year old, I could get a £30 annual discount. However, I found that this ‘benefit’ did not apply to the tariff that chose, but to the second cheapest one. Guess the difference in price between the two – you got it – £30.

Cameron’s statement implys that for domestic electricity consumers each supply company will end up with one standard 24 hour tariff and one off peak tariff for each of the 14 U K regions. One only has to watch David ‘Pinocchio’ Cameron when he speaks to see his nose get longer with each word.

David b says:
25 October 2012

The easist way to achieve lower energy bills and a fair way of pricing is To remove entirely the massive “green” tax which loaded on to the energy bill of evry user no matter what the earn or whether or not they pay income tax. The whole set up is one big scam

David Buckley says:
25 October 2012

The quickest and easiest way to lower energy bill is to remove the “green” tax which is loaded on to the price of every powr unit used. Everyone is charged this tax irrespectivbe of their ability to pay andit is used to subsidise the costs of the useless windmills. The whole scheme is a scam

David Buckley says:
25 October 2012

Get rid of the “green” tax on every unit of power used to subsidise those installing windmills etc

All the comments are valid but missing the point. These companies will continue to raise prices above inflation every year and increase their advertising budgets to encourage us to switch to them by massive TV advertising. Politicians will all tell of the virtue of switching to find the lowest tariff so we are to blame for not shopping around. We either need to find an effective, alternative domestic generation system to offset these abusive price rises and pressure on our spending power or we will need to support a political party who will do something about it. if there is one! Certainly Labour, Conservative and Liberals politicians seem incapable of devising a strategy with the consumer in mind but this should not surprise any of us. Is there an effective political party out there willing to grip this issue and make a difference to the UK population. I have switched to another company but it’s still hopelessly expensive albeit £200 less so….Big deal!!

Michael Farrer says:
25 October 2012

If we really want to save energy surely one of the best ways to discourage use would be for the utility companies to make the first units used (on my bill the first 187 kWh for electricity and the first 482kWh for gas) cheapest and the following units more expensive rather than the other way around.
Surely by forcing the companies to give customers the chance to be put on the cheapest tariff we wll see the companies putting up the prices for everyone for who is going to opt to be on a more expensive tariff?!

I have no faith in any of these promises. At the end of the day, the companies will always find a way around any rules and conditions and they are only interested in making as much profit as possible. Fairness to consumers does not come into it.

Steve says:
26 October 2012

I so agree Joe.Profit is the only motive and excuses will be found to put prices up and rarely reduce for long.The major excuses I keep seeing is the cost of wholesale gas which is somehow linked to oil prices so why blame wind and solar energy costs.We have to look at the longterm energy solution for when fossil fuels run out and risks with nuclear energy.In the meantime duplication of costs by so many companies doing the same thing, plus advertising and huge rakeoffs for directors so much extra money comes from our pockets.

So far most of these comments go over the same ground that has been covered in other conversations – “The energy market is broken”, “Could you beat our tariffs”, “Angered by British Gas…..price rises”. Standing charges, green energy, nationalisation – surely it’s time to put the constructive comments together and get views from the suppliers and the regulator so the arguments can be other than just one sided. Which – shouldn’t you be doing this as par tof the conversation?

Comparing business costs of electricity and gas with household tariffs (exc. VAT, so what the suppliers charge) might be interesting. Not that easy to find the business tariffs – all I’ve found is an indication of unit costs without other charges. Perhaps business users could contribute their tariffs?
It looks as though the units may be around 20% cheaper. On the basis that business users should be able to negotiate better deals than householders, because they use more and are subject to time/usage restrictions, is this reasonable? I wonder what actions business users are taking to get “fairer” pricing – and what about our Local Authority and Government establishments – what do they pay?

victor parry says:
4 November 2012

the Prime Minister,s promise to make the energy companies apply lowest tariffs to everybody is useless. they will simply make their highest rate their lowest! They already act as a cartel What we need is the regulators to enforce lower prices, not just for domestic use, but for the benefit of the.whole economy of the country.

WELL-INTENTIONED CAMPAIGN WON’T FIX A MUCH BIGGER PROBLEM.

On their own, David Cameron’s on-the-hoof policy proposals simply won’t work. If the energy companies are forced to switch their customers to the lowest tariff “available” then the utility companies have many devious work-around tactics at their disposal – for example, they will be encouraged to obfuscate tariffs and confuse the public even more than they do at present, or they will be inclined to adopt predatory pricing strategies, such as discounting consumer energy prices temporarily at sign up.

There are two fundamental issues that must be addressed: 1) we need a simplified pricing structure for all domestic energy users in the UK, and 2) we need to encourage more consumers to switch energy suppliers.

The consumer already benefits from a simplified pricing structure when buying energy from a petrol station. Just a simple pence per litre tariff exists at all forecourts and the consumer can easily shop around. Pricing domestic energy isn’t quite as simple as this but it doesn’t need to be as complicated as it is at present. As an Ovo Energy customer, I am pleased to say that Ovo is setting the gold standard by simplifying their tariffs.

The second issue is all about overcoming the resistance of the consumer to switching suppliers. The utility companies can do a lot to help here. All energy bills, whether monthly, quarterly or annually, should contain precise data for the electricty and (where applicable) the gas energy consumed (in kWh) over the billing period. When 12-month fixed contracts are due for renewal, customers should also receive a reliable estimate of the total spend on energy over the previous year, with a break down of the total cost of the standing charges and the energy consumed. The calculations issued with statements should be spot checked by an overseeing body.

A simple, hassle-free energy switching process, aimed at those who have internet access as well as those who do not, needs to be explained clearly to the public. Only when consumers are armed with the right information will they feel encouraged to exercise their free choice and switch.

In general Peter l agree with everything you write except for the aversion to switching suppliers.
I’m one of those, basically because l do not understand, nor can l comprehend the plethora of tariffs that are being thrust at us. The last check I did meant only a saving of £20 per annum, and to be honest I could do with a spare £20 but it just didn’t seem worth the hassle, and besides i would still feel that I was being ushered into an even worse deal than the one I have now!
I’m not stupid, l have a degree, just not in economics!

Andrew R (Plymouth) says:
18 November 2012

Ok let’s ignore all of the comments about people who distrust free markets, perhaps they should pop off to ex-Soviet Russia where goods were allocated by queing. I would also point out that (in the past) we had some of the cheapest energy prices in Europe due to competition.

I agree that that we need to radically simply tariffs and get rid of “Standing charges” wrapped up in more expensive initial units. My mind has been changed by contributors in this debate. One clear tariff allows simple comparison.

The regulator is clearly useless and has been useless for decades (which is a great shame) all markets with only a few suppliers are not properly free and need some ground rules setting.

Much of the increased costs of fuel is due to subsidising rich people at 40 pence per Kwh to have solar panels on their roofs, paying for windmills and other trendy stuff (barmy green policies).

The solution is to force companies to provide the advertised tariff for 12-18 months after a consumer switches with no price rises allowed (akin to filling your tank of fuel in a garage at a set price). The companies can buy forward, hedge or just take the risk themsleves so no great economic barrier to this policy.

It would also be interesting to have “tracker tariffs” where there is a margin over a monthly wholesale price.

Suddenly the market would work overnight, it would be worth switching (for 18 months even I’d do it) and we could get rid of all of the useless staff in the energy regulators office. It is depressing that it takes 6 people on “which” to thrash out a workable solution and all of these overpaid quangos with staff on £ 150,000 per annum can’t sort it out in decades!!!