Warning over energy bill changes

LightbulbConsumers could pay an extra £55 million for energy bills under new Ofgem proposals, it is claimed.

The energy tariff reforms could mean higher costs for more than 3.4 million households as they struggle to identify the cheapest energy tariffs, according to research by Which?.

Ofgem's proposed tariff comparison rate (TCR) aims to simply energy tariffs and allow consumers to compare tariffs across the market.

Consumers will be advised on their best deal based on medium usage of gas and electricity, but only 26% of consumers use this level of energy.

The remaining 74% will be directed to tariffs which could be unsuitable for their usage and would cost them more, it was claimed. Around 500,000 low energy users, who tend to be on the lowest incomes, could be advised on the wrong tariffs.

Richard Lloyd, executive director at Which?, said: "Rising energy bills remain one of consumers' top financial concerns yet six in 10 of us have never switched supplier as people are left baffled by the vast array of complicated tariffs. These current proposals are far too complicated and will fail to achieve their aim of making it easier for people to find the best deal, with three-quarters of people being asked to compare prices that are not based on their energy usage.

"The Government should introduce single unit prices for each energy tariff so people can easily see the best deal for them at a glance. Only then will people have the confidence to switch, injecting much-needed competition into the broken energy market."

Only one in 10 people can spot the cheapest energy deal from a range of standard tariffs, according to Which? after a survey of 1,029 UK adults last year. This increased to nine out of 10 when the deals were presented with a single unit price.

An Ofgem spokesman said: "Ofgem's reforms will deliver a simpler, clearer and fairer energy market for consumers and will make it much easier for consumers to choose the right deal for them. Our key goal is to try and get consumers engaged with the market as 70 per cent are currently not taking part. Which? is misrepresenting the purpose of the tariff comparison rate and how it fits into the full scope of Ofgem's reform package. The tariff comparison rate acts as a prompt to consumers to take a look at comparative deals . The tool is similar to the 'typical APR' used in financial services marketing.

"But it is partnered with personalised consumption information necessary to make a full and accurate cross market comparison , which every supplier must provide via bills and annual statements. Ofgem's reforms will also see suppliers cheapest deals on your bill. We share the desire with Which? to see an at-a-glance tariff comparison. We are taking forward our innovative proposals to put the market cheapest deal on consumers' bills - even if it is from a rival supplier - and this will remove the need to compare tariffs altogether. We hope Which? will respond positively to our invite to them to join this next stage of our work."
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