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EDF Energy – we support simple energy prices

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Which? is calling for simple energy prices to end confusion and make comparing tariffs easier. In this guest post, Martin Lawrence from EDF Energy explains his support for a single unit price.

I know that working out which energy supplier offers you the cheapest deal can be confusing. Instead of taking a few seconds, comparing prices means having to do some serious homework.

How have we got ourselves into such a state? Well, it’s largely because not all suppliers use the same methods for calculating the cost of the gas and electricity you use. Today energy prices are set regionally, with some suppliers charging a daily standing charge (which can vary from tariff to tariff) and a price for each unit of electricity and gas consumed.

Other suppliers operate a more complex ‘two tier’ pricing structure, where customers are charged a lower unit rate once they have used a certain amount of energy.

Given all these variations, it’s not surprising that the customers I speak to tell me they want simpler prices. And they’re absolutely right.

That’s why last year we scrapped two tiered pricing – replacing it with a small standing charge and a unit price. We also now offer just two types of energy tariff: fixed and standard variable.

Taking simple prices to the next level

Now we think the energy industry needs to take a bigger and bolder step to make it easier for customers to get the best deal.

Like Which?, I believe standing charges and tiered pricing should be scrapped and replaced with one single unit price. This means customers could compare energy prices at home as easily as they can compare petrol prices on the road. There would only be one price – the unit price – to compare between different suppliers, making it simple to select the cheapest tariff.

EDF Energy is the first major supplier to support single unit pricing. That’s because we believe it’s time to end confusing and complex prices once and for all. Consumers would benefit by being able to pick out the cheapest deals – while suppliers offering the best prices would gain by winning more customers. There would be no hiding place.

A change to single unit pricing would undoubtedly make it easier to compare prices, but it would also change how bills are calculated. Low energy users would pay less because they would no longer be paying a standing charge. People using relatively high amounts of energy would pay slightly more. The government can help suppliers identify vulnerable high-consumption users, so we could target them with energy efficiency measures and offset any modest increase in their bills.

Energy suppliers must act together

Single unit pricing can only become a reality if all the energy suppliers act together – adopting the same model so consumers can compare prices like for like. No one company can act alone.

We believe that the regulator, Ofgem, would also need to create a central ‘clearing house’ to eliminate regional cost differences. These exist due to the varying cost of distributing energy to different parts of the country. Sweeping away the complex pricing structures which confuse customers is a big step and an essential one. So we now call on other suppliers to join us and remove tariff complexity once and for all. The message from customers is loud and clear. They are calling for change and energy firms need to listen and take action now.

So, there are obstacles. But I know these can be overcome. The energy industry needs to win back the trust of consumers with deeds rather than words.

Which? Conversation provides guest spots to external contributors. This is by Martin Lawrence, managing director of Energy Sourcing and Customer Supply at EDF Energy. All opinions expressed here are Martin’s own, not necessarily those of Which?

Comments
Guest
Allan says:
15 June 2013

Well done to EDF for putting customers first. I think it’s a great idea.

Guest

It is going to be an uphill battle trying to win the trust of consumers, Martin. With fuel prices rising fast, it is inevitable that there will be criticism of all suppliers and there is not much that can be done to comfort the customers that have to meet these rising costs.

I hope EDF and other suppliers monitor this and other websites to learn how members of the public view their energy supplier. Not all the comments are negative.

Single unit pricing will be very helpful and until this happens, it is important that customers are told by their supplier if they could save money by switching to a different tariff, rather than waiting for them to ask. I believe that energy suppliers are now required to do this but I am not convinced it is happening.

There is considerable concern about how energy companies are dealing with pressures to move to renewable energy sources, and even more about how much this will cost. There has been considerable investment in wind power despite its intermittent nature and it is fairly obvious that an integrated approach is what is needed to use renewable energy sources effectively. This is perhaps the best example of the need for transparency in the energy supply industry.

The roll out of smart meters has generated considerable criticism on Which? Conversation. This may be driven by government or the EU, but we need the support of our energy suppliers to delay the roll out until the huge cost and concern about security issues have been properly investigated and that the smart meter will still function if they switch energy supplier. In the meantime, I do not see a problem with individuals paying for a smart meter.

My personal hobby horse concerns energy companies keeping customers in credit and this has been mentioned by various people contributing to discussions on this website. For years I have paid for energy by monthly direct debit and this has been routinely increased, allowing me to build up a substantial credit balance. Every time I called my supplier (not EDF) it was easy to get a refund payment or to cancel the planned increase in direct debit, but some people have not been so lucky. All I want to do is provide meter readings when requested and pay for what energy I have used. If this is not an option because of the costs in administration, then I might be prepared to accept this, but no-one has ever told me this. I can appreciate that for some people it would be better to build up credit in the summer months to cover heavy winter use, but some of us would prefer our money in our banks, not in the bank of our energy suppliers.

Thank you for support of the single unit price and for contributing to Which? Conversation. I hope you can spare the time to make further comments and perhaps answer a few queries.

Guest

Ok Mr. EDF this all sounds good. Now put your money where your mouth is and just do it.
You won’t win back trust by only talking about it, by just saying what you think consumers want to hear. Actions speak loudest.

Guest

I think we have to defy the major energy suppliers not to follow EDF’s lead as a first step. Easy switching is the way to put the power back into consumers’ hands. If just one or two of the majors would sign up to the same policy as EDF the others would probably have to fall into line for commercial and “corporate social responsibility” reasons. After all they can’t keep banging on about how responsible they are, and how they are always putting the customer first, and then ignore such a good example of how they can put words into deeds.

Which? is recognised throughout the UK as the expert body on consumer issues. So if Which? says it is a good thing, then it is a good thing. If Which? says the behaviour of the other energy companies is bad for consumers then they must accept that they are out of line. So long as price collusion is avoided, there will still be competition for our business and there is more – although not much more, I admit – to energy supply than the unit price [like customer service, billing comprehensibility, payment facilities, product bundles] which will enable consumers to make suitable choices.

It was reported on the BBC News website today that “the energy regulator Ofgem said the proposed scheme would not be as easy to implement as it might appear. This was because of the number of payment options and special “dual fuel” packages that currently existed.” I think Ofgem are introducing objections to EDF’s proposal because it does not fit exactly within Ofgem’s template for simplification of energy supply tariffs. There is no reason why the standard unit price – the headline rate – cannot be declared and then customers can attract various offsets or discounts depending on how they pay their bills, how many fuels they take, whether they do on-line meter readings, whether they have a smart meter, whether they sign up for a one-year/two-year/longer term contract, the level of exit penalties, whether they will pay as they consume [so never in credit or debit] or have a standard monthly payment, and so on. There could be competition on these elements so people could easily work out what suited them best. In a previous conversation, one of the regular contributors [whose name I cannot quickly find] suggested that there should be a national tariff adjustment day and that – unless the regulator approved otherwise and universally because of substantial wholesale price changes – no further alterations in price would be permitted for twelve months. I think that would be one of the best things that could be done to protect consumers and establish a level tariff platform. Such controls should also apply to the off-tariff elements that I mentioned above to stop companies making up on the swings what they were losing on the roundabouts. Perhaps it smacks of too much central regulation, but with computerised marginal rate manipulation and a multitude of peripheral prices driving consumers crazy, the suppliers have asked for it.

Guest

Ofgem’s proposals for reduced tariffs already include both unit cost only, and unit cost plus standing charge. So EDF is only offering it seems one of these options. It is a smokescreen to suggest that it is too difficult to compare your annual predicted bill if you can be bothered to make the little effort (how long does it take using Switch with Which to check your best supplier and tariff?).
I use above average, like many people, not for reasons of profligacy but for sound reasons. I have made all reasonable energy saving measures but for medical reasons use more electricity and gas for heating. Others have family homes, homes that can’t be well insulated, all variations that have been stated in previous conversations.
All I want is the choice to find the best deal – I do not expect to be penalised because I use more energy than average. And at the moment my best deal has a high standing charge.
Which has never put the counter argument for alternative pricing structurers, but no doubt Ofgem does have reasons for including, for example, a standing charge option. A pity those reasons are not publicised so at least we have a balanced discussion.
I’d also be wary of an energy company coming out in favour of one pricing method and challenging their competitors – they are there to make a profit, not to be the customer’s best friend.
The “big 6” dominating the market is one of the real problems – opening the market to more competition will be most likely to produce better results for the consumer.

Guest

I don’t understand why we have to pay a standing charge, that just makes the price higher for low users. Most low users are pensioners on low incomes and can ill afford energy prices, The only acceptable reason for keeping a standing charge is for properties not using any energy but not having the supply cut off. Second homes and empty homes.

Scrap the standing charge and have one unit cost.

Guest

I think standing charges are necessary for fair prices; why should larger households subsidise smaller users. I dont believe most low users are poor pensioners , householders who are “in” all day use more fuel than those out (at work) all day. The low users are more likely to be single working households.

Having a standing charge need not make it more difficult to compare suppliers, a compromise would be to have an agreed national fixed standing charge across all suppliers.

Guest

rarrar,

“I think standing charges are necessary for fair prices; why should larger households subsidise smaller users”?????
Or you might say; why should smaller users pay a standing charge and subsidise larger households?
A standing charge whereby you pay even before you use any energy, whereby low users who are low users for whatever reason subsidise high users is most certainly not fair.
I completely disagree with your argument that a standing charge is necessary for fair pricing. You are in my opinion 180 degrees out, and completely wrong.