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Simpler energy tariffs on the horizon

Simpler energy tariffs on the horizon

Category: Gas and electricity

Updated: 14/10/2011
First Published: 14/10/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Under fire gas and electricity providers are to be forced to introduce simple tariffs, clearer bills and annual statements under radical reforms proposed by Ofgem.

The aim of the proposals is to enable all consumers to compare prices easily and allow those seeking more innovative tariffs to be free to choose them.

Consumers wanting a no frills tariff will get a simple unit price and a fixed standing charge, which will be set by Ofgem.

More complex tariffs would still be available to anyone who wanted one, but they will have to be fixed for a period of time, so that prices do not rise for the duration of the deal.

Providers of both no frills tariffs and the more innovative plans would still have to show prices using standardised price information to allow easy comparisons between the two.

The announcement comes at the same time that the regulator revealed profit margins at energy firms had risen to £125 per customer per year, up from £15 in June.

According to the analysis, the average dual fuel bill now stands at £1,345, taking into account the recent round of price rises sanctioned by the major energy providers.

Despite admitting the margin of £125 per year is expected to fall back next year, Ofgem said these latest findings suggest competition in the market is still being stifled.

"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," said Ofgem's chief executive Alistair Buchanan.

"At the moment that is not the case."

Mark Todd, director of, said customers will be stunned to find out that profit levels at suppliers have risen so dramatically.

"The growing level of upset was witnessed this summer when there was a 300% increase in switching behaviour, with around one million homes opting for a fixed tariff in the face of some of the largest energy price rises ever seen in the UK," he added.

"Our own research reveals that British households will face record energy bills this winter with an average likely to be over £550 for the three months of December-February.

"I can't stress enough how vital it is for people to seriously review their energy contracts and switch to another supplier or tariff."

Ofgem's report comes in the same week that energy firms were accused of giving inaccurate information and wrong advice to people who ring up to switch their gas and electricity tariffs.

An investigation by Which? found that providers failed to offer their cheapest tariff in around a third of calls it made clearly requesting the cheapest deal.

The advice given by providers with regards to potential savings, cashback deals and fixed prices was also deemed 'questionable'.

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