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Give customers simple prices & end energy market confusion

Man standing outside a large maze

As another winter of inflation-busting energy price hikes bite, how do you feel about your supplier? Are they top of your Christmas card list? I very much doubt it!

When it comes to trust, the energy industry has just dropped to an all time low. More than half (54%) of the public now say they don’t trust energy companies, putting them second only to car salesmen in the low trust stakes.

It’s no surprise that people feel like that when you look in more depth at the recent price rises. You’ll have seen the recent headlines announcing average increases of 7, 8 or 9% depending on which supplier you’re with. But actually, where you live and how much energy you use could mean that you’re facing a much bigger increase in your monthly bill.

Take SSE customers in the North East. If they’re on the standard dual-fuel tariff, paying by cash and are also low-energy users, they are facing a whopping 17.15% rise for their electricity. Or think about Npower customers in northern Scotland. Low-energy users who pay by direct debit are facing a 15.91% price hike for their electricity, rather than the 9% average.

Energy price rises worst affected regions

It doesn’t have to be like this. Steps can be taken by the government to make competition in the energy market work and keep prices in check. And following the Prime Minister’s commitment in October to force energy companies to move people on to their cheapest tariff, we’ve finally got an opportunity to make this happen.

Single unit price for energy

However, this requires the government to go a step further with its proposals and introduce a single unit price for energy. This will ensure that prices can be easily compared at a glance, like on petrol forecourt displays, allowing people to find the cheapest deals with ease.

Why is this so important? Well, prices will only be kept as low as possible if there is more effective competition between suppliers in the energy market. And there will only be price competition if people can compare their current deal against other offers and easily switch. As things stand, the Prime Minister’s promise should help you get the best price from your existing energy supplier. His promise does not guarantee the cheapest price on the market or a fair price.

And what about switching? We know that some people have found the process frustrating and time-consuming when it comes to moving to another tariff. Switching must be made quicker and easier.

This is why Which? has set out how this can be achieved in a new report called ‚ÄėThe Imbalance of Power‚Äô. Call it our Christmas present to the government and the energy suppliers to help them sort out our broken energy market.

Let’s hope they read it over the holidays and come back in the New Year resolved to ensure that we all get a fairer deal.

AndyT says:
25 January 2014

Outcome BAD.
So the campaign to remove dual rate tariffs with no standing charge has predictably resulted in thousands of low consumption users of gas only for cooking paying exorbitant standing charges and a very slightly reduced unit rate. This hits pensioners on low income and likely to be low users very hard. Their costs are unrelated to their consumption as the fixed standing charge overwhelms the cost for units consumed.

Well done all you nobs who thought there were helping remove a simple dual rate tariff.

Ofgem requires all suppliers to include a single unit rate plus a standing charge Рbut that standing charge can be zero. There are a number of gas suppliers who have a £0 standing charge Рswitch to them if you are a very low user.

There are two main choices:-

1. A standing charge (eg per day) plus a unit price for what is consumed. or

2. No standing charge, but a higher unit price for what is consumed.

A low usage might be cheaper with option 2, even though the unit price is higher. Higher consumption is almost certain to be cheaper with option 1. The energy companies will certainly recover all their costs and make their profits, whatever the choice of tariff they provide. The only other way of guaranteeing lower costs for poorer people (whether they be pensioners or families on low incomes) is to operate a subsidy, whereby better off people pay over the odds to fund a subsided reduction for poorer people.

The big question is should we rely on the energy companies to make these evaluations and apply their rules to charge more for some people so they can charge less for others? Or is it the role of say the Benefits Agency to supplement poorer people’s incomes to enable them to pay the normal price ? Most would say the latter is best because if you do it through the supplier, then why stop at energy companies ? The next thing would be two tier pricing in supermarkets.

AndyT says:
25 January 2014

Thanks but:-
UKPower comparison site said there weren’t any gas with zero standing charge. Then using other searches only found EBICO offering gas with standing charge zero. This issue was raised today on Radio4 Moneybox program.

What matters is your total annual bill. A supplier offering zero standing charge will recover fixed costs through a higher unit charge. Average annual domestic gas consumption is 15-16000 kWh. My calculations show that using Ebico, with zero standing charge, and Daligas with a daily standing charge of 19.22p, Daligas come out cheaper when you consume 3100 kWh a year or more. So You would have to be a very low consumer not to be better off with a standing charge

David John Hughes says:
25 January 2014

example of low user and standing charge over 90 days,Gas £8.70p standing charge£25.03p, Elec £63.20p standing charge£22.53,so yes so very unfair,we are told to keep consumption down,and this is what they do to you,thats Eon by the way.

E-ON’s standing charges for current tariffs seem to be Elec ¬£0.16422 and Gas ¬£0.21903. This would be ¬£13.07 cheaper than you quoted over 90 days. There are also cheaper unit rates from other suppliers. Have you looked at whether you would benefit from switching?

Regardless of tariff it seems obvious that a lower consumption however achieved is in everybody’s interest. Every time i pass some of my neighbours houses and notice their lights ON (at times even when they have left the house) I feel sorry for us all. You would not have believed there is an environmental concern, let alone a financial cost. What does it take to behave in a considerate way; or is it a case of ostentatious consumption, if not plain ignorance?

“Every time i pass some of my neighbours houses and notice their lights ON (at times even when they have left the house) I feel sorry for us all. ”

they probably do that to deter burglars

Have I got this wrong? I thought that the government had reduced some of the “green” elements of the energy charges and that this would automatically reduce all of our bills by a small amount; it has not happened in my case with First:utility. Also I thought that we were supposed to be automatically moved to a cheaper tariff, but again this has not happened. Comments please!

I think these two are still in the “unfulfilled promises” folder.

Some companies have stated that their recent hikes were below the average because they were already factoring in this green reduction. Not sure I actually believe that though. Their crystal balls never seem to operate when it comes to purchasing forward energy prices.

And all I can see that will happen with a reduction in energy tariffs is the sneaky energy companies will just remove the cheaper tariffs, Which was to be expected by anyone unless your a government minister or regulator. And I thought all they needed to do was let you know, have you tried looking at your online account if yoru energy provider does that.

I think we are all well aware that the word automatic is guaranteed to apply (and immediately) to tariff and price increases, but when it comes to reductions, there will be endless reasons why huge numbers of people might not be eligible and even for those that do qualify, endless reasons why it might take months to come into force. Or am I being just a bit cynical ?

EdH says:
23 April 2014

I switched to Coop Energy for gas and electricity on a fixed tariff, on the 12 April this year I was asked if I wanted to sign up for another 12 months on a fixed tariff and after checking the costs agreed to do so but now on the 23 April after signing up I receive a letter stating they will increase my monthly payments by 22% even though my payments equal the current energy use and with summer coming on my usage will reduce. I fee they should have told me about the increase at the same time as the request to go for another years contract. Is this a fair and open way to do business?

Well I’m not too happy with Which’s Best Energy Company Recomnedations. I switched to OVO last winter by Which’s recomendation, and have just discovered they have been charging me for Duel Fuel using estimated readings even though I’ve been deligently giving them meter reading every month they asked me for them. When I challenged them about it they gave me a lame excuse ” You gave your reading before the last day of every month when the bill is processed therefore we have to estimate for the days up to the last day and bill you for that.” Yeah and what a surprise they estimated way higher than the reading I gave for one day. Whats the point in me giving meter reading then if they are going to pad the bill anyway? I was better off with my old supplier Southern Electric. That will teach me to trust Which about these things. ¬¨_¬¨

Hi Mohawk, thanks for your comment about your switch-over to OVO. I’m sorry to read that you’ve had some problems with them, and I’d like to thank you for sharing your experience with us here at Which?.

It’s a shame to read about your problems because OVO generally score extremely well in our annual survey: