Ofgem unveils energy tariff plans

Oct 19 2012

Energy suppliers will be forced to tell customers about the cheapest tariff they have on offer under proposed reforms for the industry unveiled by the energy watchdog.

Ofgem said its plans will put an end to consumers being confused by complex tariffs and will usher in a "simpler, clearer, fairer and more competitive" energy market.

The plans come after Prime Minister David Cameron was accused of backtracking on a commitment to require energy firms to give households the cheapest deals - rather than simply inform consumers what is available, as unveiled by the regulator.

Ofgem is extending proposals unveiled last year to simplify tariff structures and limit core tariff numbers across the whole market. The regulator proposed that suppliers should offer four core tariffs to cut the "baffling" array of tariffs currently on the market. This will actually mean four tariffs per fuel type - electricity and gas - to apply to each payment type.

The watchdog wants to introduce new tools to help consumers switch energy account. As well as giving customers information on the cheapest tariff they can offer them, Ofgem has proposed a scheme where suppliers offer vulnerable customers and others who have not switched for some time an estimate on the cheapest tariff across the whole energy market.

Ofgem is legally required to go through an extensive consultation process but wants to start to introduce its reforms by summer 2013.

Ofgem chief executive Alistair Buchanan said: "Our plans will put an end to consumers being confused by complex tariffs and will usher in a simpler, clearer, fairer and more competitive energy market for all consumers.

"We have spoken to thousands of consumers who have helped us shape this package through a period of extensive consumer research, and are very grateful for their input. I am glad to say suppliers have already responded with some initiatives, but these don't go far enough.

The Prime Minister plunged energy policy into confusion with his surprise announcement that the Government would legislate so that gas and electricity companies "have to give the lowest tariff to their customers". Energy Secretary Ed Davey distanced himself from the proposal and No 10 said energy firms would be obliged only to "offer" the cheapest tariffs.

Mr Cameron, attempting to clarify his statement, stopped short of repeating his previous suggestion that companies would be compelled in any way to put customers on the cheapest tariffs. Arriving in Brussels for an EU summit, he said he wanted to be on the side of hard-pressed people "who struggle to pay energy bills".