Supplier calls for pricing reform

EDF billOne of the UK's biggest energy suppliers has called for petrol forecourt-style pricing in a bid to help consumers identify the best deals.

EDF Energy, which supplies 5.5 million households and businesses, said it will implement single-unit pricing for gas and electricity if all other suppliers also committed to it. It would mean that customers would only need one price - the unit price - to compare between different suppliers.
Energy prices are currently set regionally with some suppliers including a standing charge and a price for each unit of electricity and gas consumed. Other suppliers operate a two tier pricing structure, where customers are charged a lower unit rate once a certain amount of energy has been used.

Energy watchdog Ofgem, which is overseeing reforms of the retail energy market, said it shared EDF's goal of a simpler energy market but warned the single unit price option was not as "simple as it sounds".

Ofgem's retail markets and research partner Maxine Frerk said it did not take into account discounts for payment method, dual fuel and paperless billing. She added: "Our extensive consumer research indicates that customers value these discounts, and our reforms seek to deliver simplicity while retaining the choice that consumers value."

Its reforms aim to ensure there are fewer tariffs, clearer information for consumers and fairer treatment from suppliers.

EDF said that for single unit pricing to work, Ofgem would need to create a central clearing house to eliminate the regional cost differences, which exist due to varying cost of distributing energy to different parts of the country. And all suppliers would need to adopt the same model so consumers could compare prices against the same measurement, meaning EDF Energy could not sign up to it alone.

EDF Energy's managing director Martin Lawrence said: "We know many consumers are confused when it comes to identifying which tariff is the cheapest for them - which is why we back these plans to simplify the market. By introducing a single unit price for electricity and gas, consumers would be left in no doubt as to which suppliers were offering the best deals. There would be no hiding place."

Adam Scorer, director of policy and external affairs at watchdog Consumer Futures, said: "EDF's proposals have a lot of merit and we look forward to working through the proposals with them. If single-rate pricing can be got right, then it could simplify the energy markets and encourage consumers to get engaged." He added the issues surrounding single pricing should be "addressed quickly so the energy market can continue to get simpler for consumers without having negative impacts".

Energy and Climate Change Minister Greg Barker said: "Despite the attraction of greater transparency and clearer choices for consumers - which are at the heart of our new approach to energy market reform - there are potentially unintended consequences inherent with single unit pricing. We are particularly concerned about the impact on vulnerable high energy users including pensioners, the disabled, and those with young children. We need to make sure that we fully understand the potential impacts before making a decision on whether to move in this direction."

© 2013 Press Association
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