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Will the energy regulator’s plan make a difference?

Energy price pound

Ofgem, the energy regulator, has announced that a plan is on its way to tackle energy bills and relieve the burden on the most vulnerable energy customers in the UK. But will it be enough?

Today the energy regulator has outlined proposals to deliver a fairer, more competitive energy market that will help around two million customers on low incomes.

Update: 7 August 2018

This weekend, the government announced an independent review of energy costs.

The entire electricity supply chain will be under scrutiny as the independent review seeks to uncover ways of reducing costs and meet the government’s ambition of achieving the lowest energy bills in Europe while meeting climate targets.

The review, led by energy expert Professor Dieter Helm CBE, will build on commitments made in the Industrial Strategy Green Paper and include the role of innovative technologies like electric vehicles and artificial intelligence. Although a step in the right direction, the time for action on energy bills is now.

Our managing director of home products Alex Neill said: ‘It is right to look at how to keep costs down, but yet another review is going to be cold comfort to the millions overpaying on their energy bills right now.’

So far half a million people have backed our campaign for fair energy prices. We want to see urgent action from the government and regulator to tackle the lack of competition in the energy market and ensure all consumers get a good deal on their energy prices.

Ofgem’s plan

While the regulator has announced the plans to deliver a fairer energy market, it hasn’t yet published the full details.

The regulator has proposed a new ‘safeguard tariff’ specifically for vulnerable customers and it plans to hold a summit in July to consider which ‘safeguard’ tariff’ would be best. One option would be to increase the existing cap for four million households on prepayment meters to include those who receive the Warm Home Discount.

Some of you will recall that earlier this year we pressed for action from energy companies to tackle their often poor value standard variable tariffs. Today, the regulator noted that energy companies must do more to help customers who are stuck on these tariffs switch to a better deal. The regulator will announce reforms to improve energy switching services.

The regulator also announced a proposed cap for charges to install pre-payment meters under a warrant, and ban these charges altogether for the most vulnerable energy customers.

But, the plans announced today fall short of the Prime Minister’s aim to help 17 million families on those often poor value standard variable tariffs with an industry-wide price cap, as outlined in the Conservative’s manifesto. The policy to tackle energy bills with a price cap was also lacking from the Queen’s Speech on 21 June.

Energy bills

While we welcome the plans to help the most vulnerable as well as steps to make switching easier, will these plans go far enough to help the millions in the UK are overpaying for their energy?

We believe that any price cap intervention in the energy market should first consider our five test points before implementing:

1. It must not cause longer-term price increases
2. It must not remove incentives for providers to improve their service
3. It must not stifle innovation
4. It must lead to a truly competitive energy market
5. It must have clear criteria for bringing any cap to an end

Ofgem will be consulting on its proposals and we’ll be feeding in to this.

Do you think Ofgem’s planned interventions will be enough to deliver a fairer energy market that finally works for all consumers?

Comments

Better than a politically-motivated price intervention.

I would like to see fixed price fixed term tariffs scrapped as I believe that the difference in cost between these and standard variable tariffs shows them to be subsidised. There is little justification for them and scrapping them should bring down the svt prices.

One issue is the change in price comparison site rules – they won’t have to show all deals. I have asked Which?Switch whether they will continue to show every deal – to ensure we have the full choice – whether or not the company pays commission for a switch.

An interesting comment by Ofgem was that far more people switch insurers, having used a price comparison site, than do energy users. It seems there is insufficient cash incentive to make them take action.

So long as we have a system where consumers have to switch tariff or supplier we will continue to disadvantage many people, including the poor. Ofgem and its predecessors have been around for a few years and have not succeeded in protecting the vulnerable, so helping the poor might not happen.

Ofgem have made and are making proposals to help the vulnerable. The ability to choose a supplier that offers you a better deal for your circumstances is something many people can take advantage of, just as in any other purchase.

Energy is not all the same price; it depends upon how and where the supplier buys it. It only forms around 43% of your bill; part of the remainder depends upon the costs and efficiency of the supplier. So competition is at work and does benefit many consumers – if they choose to take advantage. Use Which?Switch to find your supplier.

We need to perhaps find better ways of identifying and helping those who cannot help themselves.

It’s always jam tomorrow, Malcolm. As I’ve said many times, we could all pay the same for energy and retain the advantage of competition elsewhere in the energy industry. If you or I manage to get a better deal it means that others will pay more for their energy because company profits are likely to be maintained.

If you bother to switch – an easy process for most of us – you can have jam today. I switch once a year (how difficult is that) to find the best deal for my needs. And I have made significant savings. Just as I can if I shop around for other things.

Why should we all pay the same for energy when it costs different amounts for different suppliers to provide it? Do we want to give the most efficient suppliers who provide the cheapest energy more money – and so increase their profits disproportionately?

I probably switched before you did. Many can and do, but that is not the point. Among those who are paying over the odds will be people in mental decline due to age. That could be us in a few years time. 🙁

I feel confident that the regulators could fix the price for energy and let the companies tender for a share in the market, based on price, commitment to customers, etc.

Good – I’m sure you’ve also seen the benefits. Those who you describe as in “mental decline” are amongst what I would describe as the vulnerable, and have maintained in a number of Convos that they should be given appropriate and special help. There is no reason why the rest of us who are not vulnerable should not use the commercial marketplace, as we do to buy other essentials.
Which? encourage this –
Save on energy bills
Paying too much for your gas or electricity? You could save hundreds each year by switching to a cheaper deal
Switch supplier today,
.

Yes, malcolm, wavechange, the energy suppliers do seem to be making it harder. I get the impression – and this also applies to insurers – that the new general policy is to make switching more cumbersome if you want to see the whole market. The suppliers then get a cut when you use a comparison site, but make even more when annual switching becomes so tedious otherwise, and few people either bother to switch at all (Ching!) or just use the single application method of the comparison sites (Ching! again).

Those who get into financial difficulty are most likely to receive help. Others just pay more for their energy, whether they are rich or poor. People matter more than the wishes of business.

David – As you say, using a switching service has to be payed for, though the cost is shared with those who don’t use it.

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“Some of you will recall that earlier this year we pressed for action from energy companies to tackle their PROFIT MAKING standard variable tariffs. Today, the regulator noted that energy companies must do more to help customers who are stuck on these tariffs switch to LOSS LEADING SPECIAL OFFERS. ”

Er… fixed that for ya, Which?

warwick says:
4 July 2017

My mother is very old with mobility issues and is also not at all IT savvy so she needs help with things most of us take for granted. Not being IT savvy means I look after her internet needs, ie energy switching , setting up a/cs. Mobility issues means she can’t read her awkwardly placed meters which is almost impossible even for fit people. Ofgem should address these issues and ensure energy companies should do the meter reading in a secure manner. Should allow sons /daughters to deal on parents behalf, again in a secure manner. Currently this is so terribly hard to achieve, companies are not training staff to understand these needs, it normally takes many phone calls etc to access a manager who has the appropriate knowledge. This needs to change as a matter of urgency.

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Pamela Mitchell says:
4 July 2017

Scottish Power offer this service of reading meters for disabled customers but you have to ask for it. Unfortunately, they are not the best regards tarrifs and I am still waiting to see any reduction in my bills after they said they would apply for the warm fuel allowance which should have reduced my bills by £9 per month.

‘Smart’ meters are a terrible health risk for all. However, vulnerable people more susceptible. They emit cancer inducing micro-waves. DON’T have one!
We need energy returned to us – renationalise & costs then won’t involve profits (from us) to shareholders, CEO’s & all that goes with corporate power. It makes total sense! Ordinary people will continue to be exploited/ripped-off until we own these essential services (along with water & telephone.)

Tom says:
4 July 2017

Z. Sullivan, can you provide a link to any articles that Smart Meters are a health risk please. Regards
Tom

Whilst I agree wholeheartedly with you about the need to renationalise the industry your earlier comments about smart meters are irresponsible in the extreme. Yes they do emit microwaves but in tiny amounts compared to, say, a mobile phone and a smart meter isn’t carried around with you.

i Agree, i have mobility issues too and can’t get down to read my meters and scottish power is unwilling to help even though they have a meter reader coming to my neighbours on a quarterly basis. I am an OAP on basic pension but the previous tennant of my flat was able to read the meters and they will not change and allow me to have a meter reader call

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No-one is required to have a smart meter at present, though that might not be mentioned in the advertising.

My energy supplier claims that one advantage of having a smart meter is: “Always receive an accurate bill”. Technically that’s right but they keep me well in credit. Don’t assume that getting smart meters will mean that you pay for what you use.

Must admit, what their proposing hasn’t impressed me. So companies offering a comparison/switch service can now not show all deals. Ah diddums. Don’t be using that service to make your millions then. Just shows how much sway companies have over regulators compared to the users that these regulators are supposed to protect.
And don’t get me started on the falsehoods being passed off as savings. One comparison site quoted a £455 saving based on the fictitious scenario that they’re allowed to use. Turns up dad will be paying £19 a month. Call me old fashioned, but how is that a saving. They really need address the rules for quoting saving cos all they do is allow ninja price hikes.

Don’t know anyone who has made savings by switching. As any real person reading this made substantial savings after switching? – it is time to renationalise.

I certainly made savings last time I switched. Not huge ones though, because I’d switched before.

Currently I’m stuck with npower, waiting to switch to ebico seemingly because ebico cannot take me on until npower put my meter details on the national database. npower have promised to do this, but claim it takes about 4 weeks to do.

Given that I switched to npower 2 years ago, I cannot help wondering if my details were on the national database then. If so, then I wonder if npower actually deleted them, so it would be harder for me to switch away from them.

Sadly the energy companies will up their rates to cover the cap so they can continue to make large profits. When David Cameron said he was going to do something, what did we get? A glossy advert about switching. BIG DEAL!

I asked EDF why variable tariffs are higher than the fixed. They said this was a way of obtaining and retaining new customers. Is this fair trading?

Variable tariffs involve less risk for EDF than fixed tariffs and hence should be cheaper.

What therefore is the role of the regulator in this case?

To better align price with costs why not allow the regulator to fix a margin between the fixed and the variable price
where the variable tariff is the lower price.

This would enable the regulator to control the opportunity to profiteer, and at the same time please everyone rich or poor.

As I posted above, I think fixed tariffs are loss leaders to grow customer bases and variable tariffs are the main source for profit taking.

As I see it, fair trading should allow suppliers to offer discounts to customers seeking them. Or put another way, customers should be able to shop around for great value prices. Which? used to be mainly about helping us to find the latter – but seems to have lost its way since then.

To put a cap on energy prices for vulnerable people does several negative things. It admits energy prices are too high. How is a vulnerable person evaluated. It is discrimination against those who still pay over 10% of takehome on energy. And of course energy companies will raise the costs on the Just about Managing sector to fill the loss of revenue. Scrapping Vat and daft unjustified green taxes on fuel is a better and more sensible way. But what do I know I never went to Eton.

Few people switch because few people understand the intricacies of power pricing. It’s a nonsensical waste of time for all consumers and a deliberately mystified money earner for the power corps.

Create a national public owned power company that is first tasked with supplying basic needs, low income consumers at a fair, non-profit price.

Over the years expand this company until all the other the other power companies are bought out and power is once more in public control.

Then we can all get on with more useful things than spending our precious time calculating which power corp is going to rip us off the least.

“Create a national public owned power company that is first tasked with supplying basic needs, low income consumers at a fair, non-profit price.”

Isn’t that more or less what ebico already does?

David Browning says:
4 July 2017

A price cap will tend to increase non-capped rates to compensate profits. A maximum price spread limit (%?) with a profit cap might work. Increased switch simplicity will be irrelevant to those who have not switched so far!

These companies are in it for one thing and that is to make money no matter what, so as for a price check on these energy companies goes, there will be no such thing, as they will always find a way of bleeding people dry, of there well earned cash.

Barrie sant says:
4 July 2017

I must ask the question as to why tariffs are necessary at all? surely a product should be the same price to every one. Charging different prices to different people must be wrong. The likes of me, an 80 year old will always find it difficult to find the best price as we are often not very competent on the computer.

Stella says:
4 July 2017

This is a fantastic initiative in a truly positive direction! Thank you Which?.

I have an economy 10 meter and as no one but SSE do it I have to go with them

Apparently…
….you might be surprised to know that there are now six suppliers who FULLY support Economy 10 meters, and a further nine who will take on an existing Economy 10 meter if it’s already fitted. https://economy10.com/2016/12/12/economy-10-prices-dec-2016/

Derek Beasley says:
4 July 2017

I find the practice of my electricity provider somewhat dubious. Tarif price rises, and they are usually rises, are implemented mid way through my quarterly bill which means the price charged is proportionately distributed based on the final meter reading or estimated reading. So the price paid may not in fact be accurately assessed. If tarifs change then a meter reading prior to the change would be fair and accurate.

That, of course, should be easily possible once everyone has a smart meter 😉

Well things like SMARTMETERS are not smart and DO NOT SAVE YOU energy and once fitted you are locked in the your supplier
I monitor my Gas and Electric and fitted a electric current meter so I know who is taking the POWER it turned out to be the POWER ADAPTORS I had a lot and dropped a few KW a day
Being a retired Electronics ENG and a RADIO/TV AMATEUR I do not want devices transmitting data I do not control
SMART METER are not smart same has you need a DIGITAL aerial for Digital TV….”WRONG” just an aerial

No lock-in, John. A nearby property has just left E.on (whose service was good but prices high) for a small startup. E.on had just fitted smart meters, and IRESA couldn’t use them yet, but with not much hassle the smart meters are now being read like the old ones and they are promised that as soon as the system’s online, the readings will be smart again.

John, do you use a mobile phone or computer online? Both of these transmit data you can’t control, with no options, as well as the switchable privacy systems. But the system handshaking is obligatory, and is also data transmission.

Power adaptors always do use power when they’re plugged in, even if the device they serve isn’t working or even present. Something to do with coils, I think. But we’ve been warned about this by Which? for at least 3 decades…

I have an electric current meter and a 13A socket power meter.

From the two, I know that most of the electric current meters are not brilliantly accurate; nonetheless they are useful indicators of power usage.

Most power adaptors only consume a few watts if left on – switching them off, when not in use, is still a good idea – especially for FIRE SAFETY reasons.

Also, most of my base load power consumption comes from (i) my fridgefreezer and (ii) my combi-boiler [even when its just “standing by” 🙁 ]. Both are, of course, usually run as “always on” appliances.

I wonder how much energy is wasted by equipment on standby and power adapters left plugged in when not in use. I moved home last year and the house had an alarm system that had been installed by the builder. The vendor told me that the system had not worked and been ‘disconnected’, but 18 years later it was still on standby – as could be seen from the flashing LEDs on the PIR detectors.

Switching off chargers and adaptors is usually quite easy [depending on accessibility] as most people probably use them in a convenient position. Switching off TV’s, recorders, satellite or broadband receivers, monitors and other gadgetry is often not so easy because the sockets are likely to be hidden behind furniture. Modern units tend to power down to a very low consumption but it would be interesting to know how low. I think the biggest waste is having two or three TV’s in the house on all day long as just wallpaper. People can presumably afford it so they do not concern themselves over the environmental implications. Keeping certain things ‘on’ is also necessary to receive data and updates.

My appliances all have switches above the worktops, making it easy to turn them off when not in use. (So far I have managed to avoid turning off the fridge and freezer.) I wish there was a sensibly placed switch so that I could turn off the TV etc when not in use.

Many have said that we should leave routers on all the time, but mine is on a time switch.

Most kitchen appliances don’t stay on standby when not in use, and as you say the sockets are usually accessible. In our utility room, although the sockets are beneath the worktops and behind the appliances, there is a run of wall switches within easy reach on the opposite wall. In fact I believe it is a wiring regs requirement for the the isolation switch for a refrigerator to be fully accessible. Our cooker is the only kitchen appliance that does have a standby facility, but just for the hob. I am forever turning it off! Just a light fingertip pressure is all that’s needed to turn it back on again. I am also always pushing the oven control knobs back in to make sure the oven cannot just be flicked on accidentally.

I think you are right about the regulations. My appliances have a fused isolator switch above the worktops controlling the single sockets below.

It is a great idea in theory, however I don’t think the energy supplier can deliver. I think the old HHCRO was the right way. Give the most vulnerable energy saving measures free. Giving them less to pay for energ forever, and reducing their carbon footprint at the same time.

Michael Westcombe says:
4 July 2017

I believe that all energy supplies should be re-nationalised.

Can you remember when it was, if Labour got back in with nationalised energy we would really suffer like before.

It is unlikely that the energy industry will be renationalised, especially since other countries have been allowed significant control – which should never have been allowed. I suggest proper regulation, so that the needs of consumers are put ahead of those of the shareholders. That does not mean that companies cannot make a profit or compete with each other.

I agree with wavechange 🙂

Tam says:
4 July 2017

last time they interfered my energy bills went through the roof. by simplifying the tariffs before everyone just ended up paying a more expensive rate plus a daily standing charge.
there should be a fair price on the standard charge for everybody based on a multiplier of the raw material cost. no green taxes atc

This Industry is broken, the regulator is in the pockets of the Energy companies and it”s the consumer that continually pays. It is a disgrace to watch these businesses get away with ripping consumers off. I suggest we all become shareholders and make a mint in dividends! Absolutely disgusting, once again Theresa May has let us down, I voted Conservative but next time I don”t think I’ll bother voting. We have no voice and our M P’s are culpable in allowing this to continue.

Please give us the details of this corruption, David, so the police can arrest those responsible. And yes, you’re welcome to buy energy supplier shares – it’s a free country!