OFGEM Reforms Will Not Make Business Gas Comparison Easier

The Energy Advice line has called on the government to revise its plans to overhaul energy tariffs, saying the proposals will cause widespread confusion for Business Gas consumers.

OFGEM’s planned Tariff Comparison Rate (TCR) could result in consumers opting to pay more than they need to for their energy, according to the switching and price comparison service for energy users.

Energy Advice Line support calls by consumer group Which? for the regulator to go back to the drawing board to find a more effective way for consumers to compare business gas and energy tariffs.

A simple price comparison format is required

OFGEM needs to introduce a simple business energy price comparison format that directly compares the actual price they are paying for energy with the best available offer their supplier is prepared to make. The business gas suppliers should be obliged to offer them their best available deal at quarterly intervals, or when their fixed term price deal ends, and which clearly compares this against the rate they are currently paying or have been paying.

This approach would encourage both business and domestic energy customers to engage with the market, because it makes it easy to compare business gas and business electricity tariffs. At the moment this is almost impossible because energy tariffs are so complex and suppliers never offer their best deals first.

There needs to be a more effective way for comparing energy tariffs than the TCR

Energy prices compared in the same way as financial services…

Energy Advice Line support any moves that make it easier for consumers to identify the best deals, but OFGEM’s proposed TCR isn’t the best way forward. OFGEM intends for the TCR to work in the same way as financial service providers use an APR, but the problem is that gas and energy prices are much more complicated than that.

Medium energy use, which is what the TCR is based on, is just not a good enough indicator for all types of business in the UK. Energy Advice Line agrees with Which? when they say that this measure could encourage low energy users, whose consumption of energy is less than average, to opt for tariffs that cost more than they need to pay.

Which? has called for the plans to be revised and for energy prices to be displayed in the same way as petrol prices.

OFGEM plan to cap the number of tariffs available

Other changes to be introduced by OFGEM in 2013 include a cap on the number of tariffs a supplier can offer, an end to multi-tier tariffs, and a ban on price increases during fixed-term contracts. OFGEM argues that the new system will encourage consumers to shop around as around 70% of energy users are not engaging with the market.

Energy Advice Line agree that consumers need more encouragement to shop around for the best prices and switch suppliers, as this is the cheapest and most effective way to keep energy spend to a minimum.

The evidence is clear that customers who change suppliers at the end of a fixed-term contract pay less for their energy than those who remain “loyal” to the same supplier year-on-year. It is very clear that shopping around and switching business gas suppliers will save customers money.

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