Are you energy literate?

Gas ringDo you really understand how much your gas or electricity is costing you each month? If so, then it would seem that you are one of the lucky few.

Energy regulator Ofgem has slammed the domestic market for being based on "complex tariffs, poor supplier behaviour and a lack of transparency". We explain why.

The number of different energy tariffs on the market has rocketed to more than 400 over the last few years.

What's more, the price you pay can vary depending on what payment method you use, whether you are on an internet-only or a standard tariff and which part of the country you live in, among other things.

Many Britons are therefore confused about exactly how much they are paying for their home energy. And studying their bills often makes them none the wiser due to the industry jargon used to explain the charges.

Ofgem wants to stop the confusion by making suppliers offer one standard tariff for each of the various payment methods - cheque, direct debit and pre-payment meter - and energy types.

If it gets its way, there will therefore be just six standard tariffs per supplier – although companies would still be able to offer as more sophisticated deals, such as dual-fuel tariffs.

Bills are also set to change, with Ofgem calling for them to display charges in the form of pounds or pence per month, as well as per kilowatt hour as they do now.

A committee of MPs is also testing the "energy literacy" of gas and electricity bill payers as part of an inquiry to see if more education is needed to improve competition and make it easier for people to switch tariffs.

The regulator wants all its proposed changes to be effective in time for next winter, although energy suppliers will have to get behind the programme if this deadline is to be met.
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