Regulator Demands Basic Electricity Tariff

The energy regulator has published demands on suppliers to offer standard tariffs and more choice, just as companies record an increase in margins.

Regulator Ofgem said in its 'Promoting Choice and Value' document, published on Friday, that tariff complexity, poor supplier behaviour and lack of transparency needed "radical change".

The document outlined plans to ensure that customers could compare prices easily and that those seeking more innovative tariffs would be free to choose them.

Under the proposals, those wanting a no frills tariff will get a simple unit price and a fixed standing charge set by Ofgem, which they can use to compare a company's price by unit.

Customers using "innovative tariffs" will also get protection against price increases for the duration of their deal.

Ofgem’s Chief Executive Alistair Buchanan said: “When consumers face energy bills at around £1,345 they must have complete confidence that this price is set by companies competing in a fully competitive market. At the moment that is not the case.

“That is why a radical break with the past is needed. Ofgem’s tariff reforms offer the quickest way to create a market where consumers can have confidence that prices are set by effective competition. Suppliers have told Ofgem they want to restore confidence in the industry and now they have the chance to do so.

Mr Buchanan added that with £200 billion of investment needed to overhaul Britain’s energy industry and rising energy prices, consumers were right to demand a "major improvement in the way suppliers behave towards them".

Watchdog, Consumer Focus, said they welcomed this "first wave" of reforms to hit the energy market.

A spokesman said: "Consumers are faced with a thicket of energy tariffs that can seem designed to confuse all but the most persistent and numerate consumers. More than 60 new tariffs have appeared so far this year, despite all the pressure for fewer and simpler tariffs.

"While these measures are welcome, we wait to see the response of energy companies. Customers need all energy companies to decide that their own best interests are served by being open and fair with consumers. Too often the opposite has been the case."

The spokesman added that energy suppliers needed to "turn the ship around" and start working for their customers not against them.

"That this news comes at the same time as increased profits will just deepen the mistrust that consumers feel toward their suppliers."

(DW/BMcC)