The government has announced plans to force energy firms to give households the cheapest tariff available. However, will you really be getting a better deal?
In a bid to reduce ridiculously high energy bills, the coalition has revealed plans that mean households will no longer have to switch providers to get the cheapest gas and electricity deal.
Until this comes into effect, households can reduce their energy bills by switching providers. Compare gas and electricity with Propertywide.
As many as seven in 10 households pay well over the odds for energy-some by as much as £300 per year! Five of the big six energy firms have all announced price hikes this autumn, putting further pressure on households and pushing more into the depths of fuel poverty.
Energy prices have soared over the last two years by an average of £200 to a record high of £1,300. It’s no surprise then that a staggering 2.643 million households feel ‘overwhelmed’ with their bills.
The latest energy reforms are expected to be included in the Energy Bill, which has been put out for consultation until January.
Households on ‘poor value’ and out-of-date tariffs who are paying a higher rate than their supplier’s cheapest standard rate will be switched to the cheaper rate.
Energy Secretary, Edward Davey, said: “I am determined to ensure all consumers get a better deal on their energy bill and get the cheapest tariff they can.
“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.’
Industry experts have warned, however, that the proposals would mean the end of some of the cheapest deals currently on offer.
Guy Newey, from energy think-tank Policy Exchange, said: “Cutting the number of tariffs and forcing energy companies to put households on the ‘best’ rate could end cheap deals.
“This risks punishing families who do the right thing and shop around.
“There is a danger this move could see fewer people switching, reduce competition and therefore push up bills in the long term.
“The Government must protect the poorest and most vulnerable customers through benefit payments and subsidised tariffs, but a ‘one size fits all’ energy market is not the way to do it.”
Four core tariffs
In addition to offering the cheapest deals, energy companies will only be able to offer four tariffs each for gas and electricity under the government’s energy plans.
The government says it wants customers placed on the cheapest available price by summer 2014 at the latest, and the four core tariffs will end the proliferation of tariffs that has taken place over the last few years.
Despite the move to reduce bills, some ministers confessed that they could not guarantee that all households would see their energy bills cut.
Labour welcomed the plans to make tariffs simpler for consumers, but argues that the government needs to reform the entire energy market and create a new watchdog, forcing companies to pass on price cuts.
The four-core tariff scheme for both gas and electricity will drastically reduce the number of tariffs currently available. The four tariffs would involve a fixed price for a fixed term and a standard variable rate, with two others based on different criteria such as payment methods or whether renewable energy was a factor.
Under the proposals, energy suppliers would have to offer just one price for each of these four tariffs. However, they can have discounts for dual fuel or lower cost payment methods such as paying by direct debit.
Energy Secretary Ed Davey said the move to reduce tariffs would encourage customers to switch, adding: “Because there will be fewer tariffs and they will be simpler, it will make it a lot easier for people to compare and will actually help competition.”
Ofgem welcomed the move and said the proposals “will put an end to consumers being bamboozled by complex tariffs and deliver choice that consumers easily understand”.