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‘Lowest suitable tariff’ to be introduced for energy customers

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20/11/2012
The Government is to oblige energy providers to automatically switch their customers onto the lowest suitable tariff for their circumstances.
‘Lowest suitable tariff’ to be introduced for energy customers

Later today Energy Secretary Ed Davey will outline plan for introducing legislation to this end, fulfilling a pledge made by David Cameron last month.

Gas and electricity suppliers will be restricted to offering four different tariffs for each, in an attempt to introduce clarity for consumers who are often confused by the vast array of tariffs currently on offer.

Davey is expected to announce that the four allowable tariffs will be a fixed price for a fixed term, a standard variable rate, and two others based on different criteria such as the payment method selected or whether green energy is a factor.

Providers will be forced to move customers onto the lowest tariff unless they opt out.

Critics have warned that the move could damage competition in the market.

Kate Rose, head of energy at Confused.com commented:

“There is a risk these plans could give consumers a false sense of security in that as they are on a cheaper tariff with their current supplier they are on the cheapest tariff in the whole market which will not always be the case.

“Simplification of tariffs to enable easier comparison by consumers is a positive step forward and will help consumers ensure they understand the options available to them and is likely to engage more people into switching supplier.

“Making consumers aware of cheaper options is also a positive step, however consumers have different needs and we believe suppliers should be engaging consumers on the best tariff for them to meet their individual needs rather than simply the cheapest available. This could be motivated by price but also the percentage of renewable energy or a fixed price contract that offers price security.

“With rising costs it is unlikely however that consumers will see tariffs reducing in price. As these plans are implemented and larger numbers of consumers are switched to cheaper tariffs, to cover the costs of supply it is likely these cheaper tariffs will continue to increase in price.

“Even with suppliers alerting consumers of cheaper tariffs, consumers should still shop around as switching supplier could provide greater savings.”

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