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Government proposals to ensure a better deal for energy consumers

Proposals to ensure that all households are on the best deal for their gas and electricity as soon as possible were published by the government yesterday.

Following publication of Ofgem’s Retail Market Review proposals, the government is setting out further ideas to help consumers with their energy bills, including the prime minister’s commitment to ensure that households get the cheapest tariff.

These build on Ofgem’s Retail Market Review, and are seeking to balance helping consumers in a market in which the majority of people currently do not engage, while maintaining consumer choice and incentives for suppliers.

The government intends to include measures in the forthcoming Energy Bill. The discussion document published yesterday seeks views on how the detail of these proposals could operate in practice.

Energy Secretary Ed Davey said: “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.

“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.”

Measures in the Department of Energy and Climate Change discussion document include proposals to:

  • Limit suppliers to four “core tariffs” per fuel. This will end the proliferation of tariffs that has taken place over the last few years. However, collective switching schemes will be able to negotiate bespoke prices.
  • Require that the four “core tariffs” contain one standard variable rate tariff, and one fixed term fixed price tariff. This will ensure that these two tariff types, which account for 85 per cent of all customers, are clear, simple and easily compared.
  • Allow suppliers freedom to offer the remaining two tariff types as they wish, to preserve customers’ choices, such as green tariffs.
  • Require that suppliers offer just a single price for each of the four tariff types . As Ofgem set out, this requirement would not prohibit discounts for dual fuel or lower cost payment methods.
  • Prohibit poor value “dead” tariffs. This will ensure that no customers are left behind on poor value, out of date tariffs.

The government wants all customers to have been placed on the cheapest price available from their supplier for the tariff type of their choice as quickly as possible and, at the latest, by Summer 2014.

These new measures will also make it easier for consumers to shop around for the best market-wide deal. The government will work closely with Ofgem in finalising the proposals.

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