Energy Secretary Ed Davey has today announced plans to overhaul the energy market in an effort to honour a promise made by Prime Minister David Cameron.
Back in October the Prime Minister promised to introduce a system that would ensure energy consumers were given the cheapest tariffs. Critics jumped on Mr Cameron’s comments, arguing that government neither had the ambition nor capability to make any such change work. With these latest proposals Mr Davey is aiming to prove otherwise.
Addressing the Energy and Climate Change Select Committee today, Mr Davey said he was determined to make sure every single consumer was able to get a better deal on their energy bill. He discussed introducing legislation that achieves two objectives: limiting the number of tariffs provided by each energy supplier to just four; and ensuring that every consumer is automatically placed on the cheapest, most suitable energy tariff.
“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,” said Mr Davey.
“For too long people have been stuck on the wrong type of energy tariff, paying more than they need to. Our new proposals will make things much clearer and easier to understand, so that bill payers can get the best deal and feel the benefit in their pockets.”
Mr Davey’s plan has predictably been met with derision by opponents. Whilst limiting the number of available tariffs will almost certainly simplify the process of choosing the most appropriate product, care must be taken to ensure that diversity is not lost altogether; after all, the availability of just four tariffs is unlikely to represent the same breadth of choice as the current set-up unless one or more of those tariffs provides an option for variable rates.
Perhaps the biggest concern about Mr Davey’s plan is that the shake-up could prompt energy suppliers to increase tariffs to offset any losses brought about by the changes. If consumers are automatically placed on the cheapest, most suitable tariff, but that tariff is more expensive than an option available today, the government will have failed in implementing change for the better; indeed, the overarching objective of the plan is to make energy cheaper and easier to understand for consumers.
Another problem was identified by uSwitch director Ann Robinson, who said: “Consumers will be left with Hobson’s choice: there will be no spur, no choice, no innovation and no reason for consumers to engage any more”.
Households should act now to reduce their energy bills. By installing loft insulation, cavity wall insulation and double glazing, households can make their homes more energy efficient. New boilers and central heating controls can also improve energy efficiency, whilst electricity can be sourced from solar PV panels. Relying on the government to make a difference is perhaps the least sensible way to proceed.