Consumers 'missing cheapest deals'

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File photo dated 22/10/13 of an Ofgem sign as the regulator has called on energy suppliers to return money to former customers after finding that the companies hold more than ?400 million in credit from closed accounts. PRESS ASSOCIATION Photo. Issue date: Friday February 28, 2014. The regulator found large companies hold at least ?202 million from around 3.5 million former domestic customers and ?204 million from 300,000 business accounts, saying it

Just a third of consumers are able to choose the cheapest energy deal despite the introduction of simplified tariffs, according to a watchdog.

Which? said Ofgem's new rules for standardised tariffs were "a step in the right direction" but found that two-thirds of consumers still failed to identify the cheapest deal.

The consumer group challenged people to spot the best deal using the standard tariffs of the big six energy suppliers - British Gas, EDF, E.ON, Npower, Scottish Power and SSE.

It found that a third (35%) chose correctly when tariffs were presented in line with Ofgem's new Retail Market Review (RMR) structure, made up of a unit rate and standing charge.

Of the rest, three in 10 (31%) picked the wrong tariff and a third (34%) either did not think it was possible to calculate or did not know how to.

Four in 10 (41%) used an aid to do their calculations such as a calculator or spreadsheet, yet only 50% of these people got it right.

Which? said the results were an improvement on a similar test in 2012, when only 8% could pick the cheapest deal using the old-style energy tariffs, "so while the RMR structure is an improvement, our latest results show that the majority of people are still baffled".

Eight in 10 (81%) picked the cheapest deal when they were presented with the tariffs in the simple pricing format of a unit rate and no standing charge, while less than one in 10 (8%) picked the wrong tariff and 10% did not think it was possible to calculate or did not know how to.

Alongside the RMR structure, Ofgem is bringing in a new system of presenting energy tariffs called the Tariff Comparison Rate (TCR), which displays tariffs based on what a medium energy user would pay and is intended to prompt a hunt for cheaper deals by low and high users.

Which? found that only 8% of those surveyed found the TCR display easy to understand.

When asked to pick the cheapest deal for low users, nearly two-thirds (64%) chose the supplier with the lowest TCR figure - which would not have provided the best deal as there is no way of working that out using the TCR.

The watchdog said it was concerned that TCRs were likely to appear in advertising and on comparison sites, leaving some consumers worse off by incorrectly using them to compare and decide on a new tariff.

Which? is running a Fix the Big Six campaign, calling on the Government, Ofgem, competition authorities and energy companies to drive forward reforms to fix what it calls a "broken" market.

Which? executive director Richard Lloyd said: "In spite of Ofgem's tariff reforms to simplify the market, consumers are still failing to spot the cheapest deal because energy pricing remains too complicated.

"More radical changes are needed to fix the broken energy market.

"That's why our Fix the Big Six campaign is also calling for a full competition inquiry, so that hard-pressed consumers can be confident that the market works well for them as well as shareholders, and that the price they pay is fair."

:: Which? surveyed 1,515 energy bill-paying adults online in January.

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