Energy Advice Line renews calls for new bills to be revamped
The Energy Advice Line has renewed calls for new simplified energy tariffs to be freshly revamped following a survey showing consumers still found them too confusing.
Julian Morgan, managing director of the business electricity comparison, switching, and advice service for energy users said the survey by consumer watchdog Which? was further proof that OFGEM should return to the drawing board. “The regulator’s reforms to billing is a step in the right direction but needs further improvements to really make it easy for consumers to compare prices and switch suppliers,” Mr Morgan said.
“Energy customers need to be able to see at a glance what they are currently paying for their energy compared to what another supplier is offering. It’s no good consumers needing to dig out their calculators and go through a complex calculation. OFGEM has made improvements but more work needs to be done to get it right.”
The Which? survey of 500 people found that only 35% identified the cheapest deal when presented with bills in the new and supposedly simplified format, which will be rolled out by suppliers in April.
The OFGEM changes require energy suppliers to advertise their tariffs in terms of two rates; a flat-rate standing charge, expressed on a daily or yearly basis, and a unit rate showing the cost of each unit of electricity or gas consumed
In further changes to take effect from April, Ofgem will introduce a Tariff Comparison Rate (TCR) on bills, similar to an APR comparison on a loan, designed to combine the standing charge and unit rate into a single measure for the purposes of comparison.
But Mr Morgan said this reform was also far from perfect. “We have said before that the TCR system is not accurate and falls a long way short of being the best possible way of helping consumers to compare prices,” Mr Morgan said. “This opportunity to shake up the billing system is unique and needs to be done right in order to maximize the benefit to consumers.”
“We think OFGEM needs to go back to the drawing board to find a measure that gives consumers a more accurate way to compare prices. The system OFGEM are proposing is based on average energy use, not actual energy use. OFGEM can do better. If consumers can’t simply and easily compare prices then they are deterred from switching.”
Which? says the new billing system not only requires consumers to carry out mental arithmetic to determine the cheapest deal, but they also need to know how much energy they use in a year. The consumer group would like to see a single flat rate for energy as happens with the price of petrol, but OFGEM claims it conducted widespread research among consumers before deciding on it’s reforms. Mr Morgan said that historically, energy tariffs were complicated with suppliers constantly battling each other to poach customers from each other.
He said canny consumers could take advantage of this by frequently switching supplier – between every 6 months to a year – to ensure they are on the best available deal. “Consumers who have never switched suppliers – and that’s about 60% of them – could save significant amounts of money by doing so, as much as £300 a year. If they use an independent and reputable switching service like the Energy Advice Line, the whole price comparison and switching process can be very quick and easy.”