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Time to Put an end to Complex and Unfair Energy Tariffs

Posted: 23/09/11 01:00

It's not often that energy policy is headline news during the party conference season. But when energy prices are people's number one financial concern, it's no surprise that Chris Huhne used his keynote speech at the Lib Dem conference to promise to get tough with energy companies. This included a call for simpler tariffs, so that people can spot cheaper deals and more easily switch providers.

Which? agrees with the Energy Secretary that simple and fair energy tariffs are needed. Not because people "can't be bothered" to shop around, but because many people see little point in switching. And because they don't trust energy companies to offer them the cheapest deal.

The way energy suppliers confuse consumers is highlighted by a new Which? investigation into energy tariffs. We asked 36 people including a solicitor, an engineer and an accountant, to work out an energy bill using nothing but information from a supplier's website. Just one - a company director - could do it. Even the Head of Maths at the Edexcel exam board, who oversaw the test, said energy tariffs are so complex that even A-Level maths students would struggle to calculate their annual bill.

But energy tariffs aren't just confusing - they're also unfair. At present, a lot of tariffs penalise lower users. We've looked at all major suppliers' standard tariffs and found that the less energy you use, the more you pay for each unit.

On average, gas prices for low users are 23% higher than for high users and electricity prices are 14% more. This clearly weakens the incentive to use less energy and it is likely to unfairly hit lower income groups.

So it is time for the regulator, Ofgem, to use its powers and introduce simple and fair tariffs for everyone. This means getting rid of complex tiered pricing and introducing a straightforward daily charge and unit rate. This will allow people to understand and compare tariffs at a glance, so that they can get the cheapest deals available.

Which?'s tariffs investigation is the start of our Affordable Energy Campaign.

Part of this will be about people taking action themselves to cut their bills and insulate their homes. But the main responsibility for change must lie with energy companies, Ofgem and Government.

In the next year our Affordable Energy Campaign will be pushing for changes right across the energy agenda and this includes asking fundamental questions about the structure of the energy market. When 60% of people have never switched, we need to think hard about how we will ever get people to shop around and get better deals. Tough questions must be asked about whether the major suppliers' customer bases will need to be broken up in order to achieve a competitive market.

We'll also be questioning the assumption that new energy initiatives should be paid for out of our energy bills. I don't dispute the attempts to reduce carbon emissions or address fuel poverty, but the cost of this must be fair and transparent. And the Government must be honest with people about how much these agendas will add to our bills over the years ahead.

Lastly, we'll be making sure that people have the help they need to use less energy. We all know it's important to make our homes more energy efficient and reduce our consumption, but new ideas will be needed to get over the barriers stopping people from insulating their homes.

We want people to get involved in this campaign and be part of the energy debate. But only through action from Ofgem, the Government and the energy companies they will we really begin to see that change is possible and move to an energy market that can work better for all of us.

Which? is asking people to email Ofgem's chief executive to ask him to tackle tariffs which.co.uk/tackletariffs