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?