Government meddling hikes energy costs
Filed under: Utilities
So how could this happen?
Cut your bills
SimplifyingThe action in question is a drive to simplify tariffs and bills. Ofgem's Senior Partner for Markets, Andrew Wright, said: "Consumers want simpler bills and tariffs that can be easily compared across all suppliers. This is why Ofgem is continuing its reforms to deliver a simpler, clearer and more competitive energy market for consumers."
Cut your bills
The proposals at the moment are for two types of contract. Energy companies can offer standard tariffs, which can offer discounts for people who pay by direct debit or who pay quarterly. However, they would not have access to a number of other discounts - such as those for paperless billing or for dual fuel.
Separate to that, Ofgem is proposing that energy companies should be able to offer fixed term contracts alongside the standard ones - where the rate is fixed for a certain period and the whole range of discounts may apply.
More expensiveThe issue that is troubling commentators is the loss of discounts for those on standard tariffs which have saved people hundreds of pounds in some instances. There are concerns that the end result may be that bills become clearer and more transparent - and more expensive.
A report in the Telegraph highlighted that in the case of British Gas, customers could lose existing discounts worth £70 a year - which is hardly a consumer breakthrough. In addition, the report claimed that some suppliers would make their discounted tariffs more expensive in order to make their standard deals more attractive.
Not as bad as it looksOfgem argues that it's not as bad as it looks. It highlights three ways in which what initially looks like higher prices could bring prices down for most people.
A spokesperson explained that the British Gas figure was far higher than many of its counterparts. He highlighted that Scottish and Southern Energy offered savings for duel fuel and paperless billing (outlawed under the new plans) but that it only added up to £13 a year. Meanwhile, EDF don't offer a saving for paperless billing, and the dual fuel saving is just £9.
His second point is that by making the standard contacts easier to compare it would encourage more people to switch, and get a far better deal. The spokesperson told AOL: "We know that people are confused by the tariffs and that this puts them off switching. If they understand what they are comparing then it gives them an opportunity to make a real difference to their bills."
And finally, at the moment these are just proposals. The spokesperson said: "We haven't given our final definitive view, we are listening and consulting at the moment and are still developing our thinking. We will make an announcement on this before the winter."
It dependsThe question of whether the new proposals will make things worse for you or not, therefore, rests on just how savvy you are. If you are on top of your bills, and keen to track down the cheapest tariff, and any money-saving options on that tariff, then the chances are that you will end up paying more under the new system. If you were stuck on a terrible tariff, paralysed by confusion, then the changes will help.
But what do you think? Let us know in the comments.