MSE News: Ofgem outlines plans for simpler energy tariffs

Consumerist

MillicentBystander wrote: »

. . . who are basically signing up to falsely cheap tariffs where a %tage of our fuel is effectively paid for by the energy company's standard tariff punters!

Well said.

I must confess that I was quite surprised to learn that 75% of customers are on standard tariffs. No wonder there is so much fuel poverty. .

MillicentBystander

Consumerist wrote: »

Well said.

I must confess that I was quite surprised to learn that 75% of customers are on standard tariffs. No wonder there is so much fuel poverty. .

I was also surprised about the figure! And it's the reason why energy companies are currently fighting it out on the switching sites to have the cheapest 'fake' tariff to lure the rate tarts. The whole system is totally corrupt and needs change. The problem for us 'online savvies' on here is when the industry is sorted out we will be paying more than we are now...but the amount we will be paying will more honestly reflect the actual cost of supplying us with the fuel. I have never for a nano second believed the very fact that you sign up for an online deal means you cost the energy company £300/yr less than someone who opts for paper bills. It's a nonsense and always has been. A bit of a dirty secret in the industry. BG have now exposed this nonsense for all to see - we have been party to 75% of punters being ripped off so we can get bragging rights of having the cheapest online deal. And that's not right.

Pincher

If moneysupermarket.com is to be believed, my SaveOnline 9 is £268 cheaper (high user) than E.On's standard tariff Energy Online per year.

It would appear that they claim profit per customer is £50 per year.
Let's assume this year it's £100, that still means I am subsidised to the tune of £168.

People are not dumb, they are just not interested in the Twister contortions MSEs are willing to go through to get a good deal.

I spend a lot of time checking prices for all sorts of stuff.

What Ofgem is saying is, people who would rather spend weeks looking for a pair of shoes than spend ten minutes on a comparison site deserve to pay the same amount as I do. If it's important to them, they should devote proportionate effort to it.

I think Ryanair needs to charge £80+TAX to make a decent living for staff and share holders. I pay 99p to £30+TAX for my tickets. For that, I re-arrange my life around the flight dates. I get up at 2am to get to the airport. If somebody wants the convenient times and dates that suit them at the last minute, they can pay £200+TAX for it, but don't moan about it's not fair.

davidgmmafan

yippeekiay wrote: »

Spot on!!! :T

Hi everyone, from a long time lurker

In my case in regards to gas usage, I use even less than 'very low'.

Since moving my supplier in May I have used 2 units - yes, TWO. That equates to roughly 22 kwh in 7 months!!

Because of the price of gas I decided that I would only use it for cooking the odd thing here and there so changed my supplier to suit my usage. I use a fair amount of electricity and with respect/contrary to another post of yours regarding gas being cheaper than electricity for heating, this is far from being the case for myself which is why I ultimately chose a supplier with the cheapest electricity charges.

Just to show you the difference here's my own findings....
If I have my gas fire on for an hour it uses 0.6 units i.e. 7kwh (putting out far less than that in actual radiant heat!!!), each kwh currently costs me 7.78p + VAT for the first 4572kwh per year (not 3p to 4p as you have posted recently) which means around 57p an hour inclusive of vat. I actually use a small fan heater instead which only costs 12.5p for the same hour thus costing just over a fifth of the price and I find it more than sufficient to keep me warm on that setting - being it's lowest. Ok, having the gas fire on full for an hour would get a bit toastie even for my thin blood as it may be putting out an optimistic 3kw (it feels much less) of heat but even if I put it on low it would still cost 19p an hour and result in a lower overall room temperature. Therefore using electricity is a no brainer for me.

If I had to pay any standing charge it wouldn't be worth having gas at all as the cost per kwh would be HUGE, also I would then not be able to benefit from the dual fuel discounts I currently receive if they continue in the future.

In conclusion....
I can't understand why a simple single charge for all units can't be sorted out for either/all fuels, then you simply pay for your usage which as far as I can see would be the fairest way all round. This system should also happen on other utilities i.e. water, as the standng charge far outweighs my usage. I could add road fund license to this group too but that's another debate.

In this ever environmentally conscious society surely a low all round user - or should I say polluter - like myself should be rewarded for my low use - not penalised!!.

Sorry for my first post being so long and a bit of a rant but I had to get some of these gripes/thoughts off my chest.

Oh...and who in the dickens voted for paying more for an easier system!!!!!!! :wall:

Paul aka Yip

And I did not expect to. A standing charge DOES massively penalize very low users. It isn't impossible to have a single rate per unit. For example say it was 4 or 5 pence per unit that would hit high users hard but that kinda of encourages people to use less doesn't it?

The companies could make a loss on certain customers, this is usually the rational for a standing charge that it costs a certain amount to supply each property with gas or electricity, but I would think this would be more than off-set by people that use more than normal.

Now using the threshold of 4572 Kwh for gas a low ish user who uses say 10,000 kwh has almost half thier usage charged at a much higher rate. Someone using forty of fifty thousand Kwh's of gas still pays that same higher rate but a lower rate for the excess which is a much higher percentage of thier usage.

I do understand many people are struggling but some people I speak to must literally have the heating on all the time, and they can't all be forced into it.

davidgmmafan

"I did get the discount right up to the day the tariff finished and was on their expensive standard tariff for a few weeks until the switch came through."

Isn't their a price hold you can request and doesn't their policy seem to contradict that?

And
"I must confess that I was quite surprised to learn that 75% of customers are on standard tariffs. No wonder there is so much fuel poverty."

I actually thought it was higher than that and had a figure of 5% in mind for online customers. Don't have any firm figures though. Suffice it to say most people don't benefit from such offers. I have often wondered quite what the energy companies would do if everyone (or even just everyone who could) signed up tomorrow. They'd have to pull the products surely?

JimmyTheWig

Cardew wrote: »

The problem with a fixed standing charge is that it discriminates against those with very low consumption.

i.e if the standing charge is, say, £100 per year and kWh charge is 10p/kWh someone with an annual consumption of 1,000kWh is paying 20p/kWh whilst someone using 7,000kWh is paying 11.42p/kWh

If the standing charge is set by Ofgem (which they are saying they will do, I believe) and this standing charge is set at a level which covers the cost of having someone as a customer then I think that this is fair.
Our old local newsagent used to charge a fee for delivering newspapers. You paid this fee plus the cost of the newspaper. If you wanted a second newspaper delivered then the extra you would pay would be the cost of the second newspaper as you were already paying for delivery.
This means that people with two newspapers are getting better value than those with one. Is this fair? Yes, because it reflects the newsagent's costs in providing the service.

Cardew

MillicentBystander wrote: »

I was also surprised about the figure! And it's the reason why energy companies are currently fighting it out on the switching sites to have the cheapest 'fake' tariff to lure the rate tarts. The whole system is totally corrupt and needs change. The problem for us 'online savvies' on here is when the industry is sorted out we will be paying more than we are now...but the amount we will be paying will more honestly reflect the actual cost of supplying us with the fuel. I have never for a nano second believed the very fact that you sign up for an online deal means you cost the energy company £300/yr less than someone who opts for paper bills. It's a nonsense and always has been. A bit of a dirty secret in the industry. BG have now exposed this nonsense for all to see - we have been party to 75% of punters being ripped off so we can get bragging rights of having the cheapest online deal. And that's not right.

Whilst I wouldn't go along with 'corrupt', I would agree the system is unfair in many ways.

Indeed I suspect many are paying quarterly and still on a Standard tariff with BG for gas and the Standard tariff with the former regional electricity supplier - the worst possible combination and the 'default position' used by the comparison websites.

You might well argue it is also a 'dirty secret' that some companies make paying quarterly much more expensive than paying by DD.

Then consider the position on pre-pay tariffs. Even when PP tariffs were much higher than 'Standard' tariffs, the Big 6 bosses all gave evidence to the Parliamentary Committee on energy that they made a loss on these tariffs.

Since then, under clear political pressure, these PP tariffs have been reduced by some companies to roughly the level of comparable tariffs. So obviously they are now operated at a considerable loss by some companies.

Ditto - political pressure to provide social tariffs - some companies provide, others don't!

Ditto - adherence to the Billing Code(12 month back-billing, dealing with complaints etc) some companies simply opt out and are not bound by the code.

There is clearly a need to sort out the pricing structure in the gas and electricity industry. However if you legislate to bring all companies in line and work to a common set of rules, the smaller companies won't be able to compete.

Take Ebico - a non-profit company - very competitive for very low users, obviously paid for by other customers paying well over the odds - does that class as a 'dirty secret'? and what action should Ofgem take?

Should we legislate to stop companies like BG, with a legacy that gives them a dominant market position, using their financial clout to undercut the opposition and destroy some of the competition?

It ain't simple!

Lifes_Grand_Plan

In my opinion the more pressing issue is unnecessary tie-ins for tarrifs which prevent people from being able to shop around.

I'm talking about direct tie-ins such as "cancellation fees of £x for gas and £x for electricity if you leave before XX/XX/XXXX" but also indirect tie-ins such as "10% duel fuel discount" which is paid once a year at the end of the year meaning people move to a competitive tarrif but are then forced to stay with it even if things change because they need the discount to pay their bills....

Come on Martin, surprised you haven't picked up on this and started the campaign.

Cardew

JimmyTheWig wrote: »

If the standing charge is set by Ofgem (which they are saying they will do, I believe) and this standing charge is set at a level which covers the cost of having someone as a customer then I think that this is fair.
Our old local newsagent used to charge a fee for delivering newspapers. You paid this fee plus the cost of the newspaper. If you wanted a second newspaper delivered then the extra you would pay would be the cost of the second newspaper as you were already paying for delivery.
This means that people with two newspapers are getting better value than those with one. Is this fair? Yes, because it reflects the newsagent's costs in providing the service.

I understand the point you are making, but where do you draw a line.

As posted above about Pre-Pay tariffs:

Then consider the position on pre-pay tariffs. Even when PP tariffs were much higher than 'Standard' tariffs, the Big 6 bosses all gave evidence to the Parliamentary Committee on energy that they made a loss on these tariffs.

Since then, under clear political pressure, these PP tariffs have been reduced by some companies to roughly the level of comparable tariffs. So obviously they are now operated at a considerable loss by some companies.

Do we insist that pre-pay customers pay a cost that 'reflects the service they provide'?

Should there be social tariffs funded by other customers?

The above are generally amongst the poorest in our society, as are many with very low consumption.

Ebico - a non profit company charge a flat rate for all gas and electricity regardless of payment method - surely the simplest tariff in UK - should they be forced to introduce a standing charge?

Consumerist

davidgmmafan wrote: »

Isn't their a price hold you can request . . . ?

Yes, if the supplier increases prices during a fixed-term variable-tariff contract, the customer notifies the supplier that the increase is rejected and then switches supplier. The increase will be "stayed" until the switch is completed if it's within a "reasonable" time.

Just writing that down highlights the utter complexity of modern-day energy contracts.