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Energy firms to be forced to put customers onto cheapest deals

Rebecca Rutt
by Lovemoney Staff Rebecca Rutt on 20 November 2012  |  Comments 10 comments

New plans have been announced today to force energy companies to switch consumers onto the cheapest tariffs available.

Energy firms to be forced to put customers onto cheapest deals

The Energy Secretary Ed Davey has announced plans to shake up the energy market so millions of UK customers will be automatically switched onto cheaper deals.

Energy firms will be forced to reduce the number of tariffs on offer to a maximum of four each for both gas and electricity. All customers will be offered the cheapest tariff available to them.

There are currently 410 different tariffs for customers to choose, according to the latest Retail Market Review by Ofgem, making it almost impossible to compare tariffs and get the best deal.

The aim of these plans is to make the whole process more transparent so customers can easily see if they’re getting the best deal.

What is changing?

Today's announcement follows on from comments made by the Prime Minister, David Cameron, last month when he said all customers would automatically pay the cheapest price available to them.

The four tariffs energy providers will be restricted to must include one standard variable rate and one fixed-rate rate tariff. By the summer of 2014 at the latest all customers paying more than these four 'core tariffs' will need to be switched to a cheaper deal.

Ed Davey outlined the proposed plans to the Energy Select Committee today. 

He said: "Bill payers will no longer face the impossible choice between hundreds of tariffs; each customer will have a maximum of four tariffs for gas or electricity per supplier to consider. And households will have personalised information from their supplier on their bills about
the cheapest tariff the supplier offers for their payment method and the cheapest tariff overall.

“For too long people have been stuck on the wrong type of energy tariff, paying more than they need to. Our new proposals will make things much clearer and easier to understand, so that bill payers can get the best deal and feel the benefit in their pockets."

Today will see the start of a consultation into the scheme which will be followed by the publication of the Energy Bill next month. This will outline the definite set of new laws which energy companies will need to follow.

Lack of competition

Although the plans today are a step forward, they have been criticised for not doing enough to promote competition in this market. Many experts believe energy companies will respond by withdrawing their cheapest deals from the market.

Mark Todd, founder of Energyhlepline.com, explains that rather than reducing the number of tariffs to a maximum of four, consumers would benefit more from better regulated competition.

“People don't necessarily want fewer tariffs, they want lower prices and less complexity. We expect the outcome of this plan will be negative - suppliers will just pull many of their cheapest tariffs and the energy market will end up being dominated by expensive tariffs from which customers will have no escape,” he adds.

Help with energy costs

There are many ways to reduce your energy bills and our article lists the top 10.

Along with switching providers, one in ten UK households are entitled to help with paying for their energy bills, according to Home Heat Helpline, but many people are unaware of what is on offer.

The average amount available is £160 and this can cover grants for insulation, new boilers, discount and rebate schemes. You can find out exactly what you could be entitled to on the website or by calling 0800 33 66 99.

More on gas and electricity:

Compare gas and electricity prices

Investigation launched into ‘fixed’ gas prices

Co-operative Energy to cut its electricity bills

Campaign to donate Winter Fuel Payments relaunched

Energy companies keep £1.2 billion of our savings

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Comments (10)

  • Talent
    Love rating 79
    Talent said

    Is there anyone out there that really thinks the energy companies, the companies that have been pulling all the stunts in the book and then some, are going to roll over and play ball. Is there? Really!

    Report on 20 November 2012  |  Love thisLove  3 loves
  • stevegeorge
    Love rating 0
    stevegeorge said

    If they don't play ball they hopefully will have their Ofgem licence revoked. This would stop them from signing up new customers and even being able to continue in the business of supplying and selling Gas and Electricity. Blow the fines strip them of their Ofgem Licence.

    Report on 20 November 2012  |  Love thisLove  0 loves
  • Grobbendonk
    Love rating 28
    Grobbendonk said

    Good points:

    - People will be able to find the best deal for them without having to have a degree in arithmetic

    - It will increase competition as people will find it easy to see when a competitor has a better deal

    - Clear fixed rates

    Bad points:

    - Fails to deal with lock-in - people will move and then be stuck with rate X while watching the competition drop prices further.

    - Fails to deal with the real problem - energy companies profiteering. They raise their rates when wholesale prices go up, and lie, cheat and steal when they fall.

    What we really need:

    - Variable rates to be capped at a rate locked to wholesale prices, so that price falls are reflected in domestic rates.

    - Massive fines for the companies if they fail to pass on price falls to customers within a predetermined limit (given global trading happens in milliseconds, I'd say one working day is a good start)

    - Companies penalised unless they are making massive investments in localised energy sources and distribution networks.

    Report on 21 November 2012  |  Love thisLove  1 love
  • coloratura
    Love rating 81
    coloratura said

    I recently had a conversation with someone at British Gas who, after keeping me on the phone for an hour (35 minutes was my waiting time - I was quoted between 13 and 21 minutes at the outset - to answer a minor query) - spent 25 minutes trying to sort out my best price for the method which I chose to use to pay - the difference was 11p but I expect my telephone bill will be much higher than that.

    I have recently seen that the Co-operative are reducing their enery bills. I expect this is a come on to attract customers and then when you are locked into a contract the price will rise so check the length of your contract and what it means....but if they are genuine about this then they will attract permanent customers (Co-op say they are aware of their purchase prices falling and they are passing it on to the customer). We will wait and see.

    I agree with the above comments.

    Report on 21 November 2012  |  Love thisLove  1 love
  • realistic_thoughts
    Love rating 27
    realistic_thoughts said

    The only reasons prices can fall is that so called "green" energy has already hiked them too much to begin with but they will inevitably keep rising on this front until all subsidies cease (the government's absent energy policy on real energy doesn't help).

    In truth, and truth is never popular, the horrendous subsidies to wind and solar through FiTs, ROCs and the Carbon Trading menace have been offset by running coal plant flat out at reduced prices as gas prices were marginally higher. When coal fired plant is phased out for 2020, the fan will be hit by sh**. not only in price terms but in electricity supply cuts as the intermittency of wind hits home.

    Let's upset the greens and the wind barons again with a typical example of how our demand is being met shall we?

    22 October 2012 at 10.30 am - Demand = 43,162 MWs

    Electrcity Demand met by:

    Wind (6,000 MWs installed capacity of Wind costing £ billions) is actually producing 615 MWs i.e. 1.4% of demand

    COAL 19.473 MWs or 45.2% of demand

    GAS CCGT 14,237 MWs or 33.0 % of demand

    NUCLEAR 6,004 MWs or 13.4% of demand

    Hydro 456 MWs or 1.1% of demand

    Pumped Storage 961 MWs or 2.2% of demand

    Other 555 MWs or 1.3% of demand

    Intercons 963 MWs or 2.2% of demand

    Please rember that we are preparing to shut down our coal-fired stations (nearly half our total production capacity by 2020)

    Report on 21 November 2012  |  Love thisLove  4 loves
  • alexms
    Love rating 8
    alexms said

    @realistic thoughts: What's the solution?

    Report on 21 November 2012  |  Love thisLove  2 loves
  • realistic_thoughts
    Love rating 27
    realistic_thoughts said

    @Alexms

    We do not and should not need to shrink our lifestyles to the doomsayers agenda – the UK government should protect our lifestyles:

    UK Energy – The Logical Solutions

    In the UK we have sufficient coal reserves to produce electricity, syngas for more efficient power generation and transport and syncrude for transport. There is no shortage of nuclear fuels.

    Taken together, we have sufficient energy resources but lack the production assets to deal with the energy conversion processes to keep the price natural gas competitive.

    We need in the UK NOW to start on:

    - More Nuclear power plant

    - Investment in thorium reactor technology development

    - Coalbed methane recovery and generating plant to burn it

    - More Coal power plant

    - More Natural gas plant (whoopee for the abundance of shale gas - frack on asap)

    - More Syngas plant

    - Coal/syncrude conversion plant

    What we don't need is :

    - Any more Unreliable Intermittent Overpriced Windfarms

    - Grossly inflated solar subsidies

    - Money wasting on "green spy smart" meters.

    - Pseudo Green CAGW Ideologies

    Report on 24 November 2012  |  Love thisLove  7 loves
  • nickthecrip2
    Love rating 17
    nickthecrip2 said

    What the effect of this bill will be, I don't know for sure, but I am sure that the energy companies will NOT lose out by it. Chopping the cheapest tariffs is a distinct possibility but they certainly WILL fiddle around with the small-print wording to keep things as complex as possible. The only reason tariffs are so complex is to confuse the customer, to prevent them from making comparisons. The reason for this, I suspect, is that there is no real difference between companies apart from pennies per year. We all know they run a cartel but the authorities are too dim, paid-off, or a mix of both to uncover this on any investigation so far undertaken. The whole energy business in this country is nothing but a massive rip-off supported by successive governments. Until those companies are brought under control, by proper legislation, nothing will change for the consumer.

    Report on 25 November 2012  |  Love thisLove  0 loves
  • Grobbendonk
    Love rating 28
    Grobbendonk said

    @realistic_thoughts - you really need to do some reading.

    Nuclear power? Really? There's less than 100 years of fission fuel left, and no prospect of finding more at an economically useful price. Totally agree with you on Thorium technology though, alongside more work on fusion.

    Coal? Er, carbon emissions? If you don't believe the world is warming, you're frankly delusional. You can argue about how much of the warming is down to our carbon emissions (the scientific consensus is "most of it"), and even if you've still hot your head stuck in the mud there, then just look up "ocean acidification" and then tell me we don't need to reduce CO2 emissions.

    Oh, an if we could stop subsidising oil, coal, gas and nuclear and let renewables have a level playing field, that would help.

    Report on 25 November 2012  |  Love thisLove  0 loves
  • athomik
    Love rating 16
    athomik said

    Grobbendonk "Oh, an if we could stop subsidising oil, coal, gas and nuclear and let renewables have a level playing field, that would help."

    If we stopped subsidising renewables, there would be nobody left in the renewables business.

    Report on 26 November 2012  |  Love thisLove  1 love

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