Standing charge lottery yet another symptom of broken energy market
Ahead of Ed Davey’s party conference speech today, Richard Lloyd, Executive Director at Which?, says it’s time for the Energy Secretary to take more radical action to reform the energy market for hard-pressed consumers.
Almost a year ago the Prime Minister promised that he would ensure all energy companies put their customers on the cheapest possible tariff. Which? was the only consumer group that openly supported his intervention as a significant step forward; one that was all the more important as millions of consumers were being hit yet again with price hikes.
Since then, the regulator Ofgem has announced plans to simplify the energy market and the Energy Bill has started its passage through Parliament to fulfill Mr Cameron's commitment.
We don’t think these measures go far enough.
Our research has shown that consumers will still struggle to spot and switch to the cheapest deal, leaving inadequate competitive pressure on suppliers to keep prices in check.
Ofgem’s proposals will still allow companies to include a standing charge as well as a unit price in their tariffs. A new Which?study shows that there is a huge variation in standing charges in consumers’ energy bills.
A standing charge is a fixed amount applied to your gas and electricity bill daily or annually. Our investigation looked at the range of gas, electricity and dual fuel deals on offer for a specific customer in one region of the country, so we could accurately compare all the tariffs and standing charges available to that customer. We found more than 109 different tariffs that included some 75 different standing charges.
This bewildering array of charges will be allowed to remain in an energy market that even the suppliers agree is too complex for consumers to easily find the best deal.
Rising energy prices are consistently one of the biggest worries for consumers; this month eight in 10 (79%) people say it is one of their top financial concerns. Despite this, many people don’t switch to save money because the market is too complicated.
It’s time for more radical action.
Which?has been calling for simple tariffs, without standing charges and displayed in the style of petrol forecourt prices, so people can easily see the cheapest deal. We recently found eight in 10 consumers could identify the cheapest deal with this single unit pricing. So far more than 10,600 people have joined our campaignin support.
It's also time to bring greater transparency and competition to the energy generation market. With much of wholesale trading done out of sight, including trades between the generation and supply arms of the major vertically integrated companies, it's hard to have confidence that the system is working efficiently and in the interests of consumers.
Which?wants to see a compulsory ring-fence between generation and supply businesses so that all our energy is bought and sold on the open market. We also want to see all energy policy costs scrutinised by the National Audit Office, to ensure Ministers are accountable for securing the best value for consumers at all times.
Consumer trust in the energy industry has plummeted to a new low. At a time when millions of households are struggling with the cost of living, it is vital that the Energy Secretary takes action to give consumers the confidence that the price they’re paying for their energy is a fair one.
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