Energy News

Consumers back reforms to simplify energy market

Thursday 01 December, 2011

By Martin Fagan

Ofgem says all consumers would benefit from fewer tariffs and single unit pricing.

Almost three-quarters of consumers would be more likely to switch energy supplier if tariffs were made simpler, according to research by energy regulator Ofgem.

The study formed part of Ofgem’s proposals for a simpler, more competitive energy market for householders. Its proposals include a “no frills” tariff with a single standing charge set by Ofgem and a single unit price. Ofgem is also proposing clearer bills and tariff information.

Ofgem said its research suggests that, under its proposals, consumers would find it much easier to compare tariffs. With a standing charge set by Ofgem and given just a single unit rate to compare, 85% of consumers tested were able to identify the cheapest deal in less than 30 seconds.

The government has frequently insisted that its planned “green deal” tax rises on energy bills can be offset by consumers shopping around for the cheapest deal and switching accordingly.

However, many organisations - including Ofgem, consumer champion Which? and energy watchdog Consumer Focus - have argued that, while energy companies continue to offer lots of complicated tariffs, it can be a difficult task.

In September this year, Which? asked 36 people - including a solicitor, an engineer and an accountant - to work out their domestic energy bill using nothing but information from the supplier's website. Just one - a company director - could do it.

“Encouragingly, we are seeing that major energy companies like British Gas, E.ON and SSE are recognising the problems that Ofgem has identified and there is a growing sense of consensus forming behind the need for a simpler, more competitive energy market,” said Alistair Buchanan, chief executive at Ofgem.

“Ofgem is now calling on all suppliers to back its reform programme, which gives energy suppliers a chance to draw a line under the past and an opportunity to restore consumer trust.”

Commenting on Ofgem’s proposals, Tom Lyon, energy expert at independent switching service uSwitch.com said: "While simplification is key, it's also important that it doesn't come with a price tag attached.

“Affordability is the most important factor for consumers and the tariff changes need to be constructed without pushing up prices. This is especially important given the size and scale of price increases already seen this year."

In November, British Gas announced it was scrapping a raft of tariffs and replacing them with just two - variable and fixed - and says it will endeavour to make its billing more transparent.