MSE News: David Cameron: law will force energy firms to offer cheapest deals

spiro

rogerblack wrote: »

never have to pay cold weather payments, or winter fuel payment again

That doesn't always work because we pay the WFP who live in Spain or the Bahamas, thats how stupid the rules are.

grahamc2003

pqrdef wrote: »

Destined to be a meaningless political gimmick I'm afraid.

The "cheapest" tariff will always be designed so the conditions mean you don't want it, or the penalties mean you pay over the odds.

And it won't stop them doing introductory offers, and it won't mean you can have another if you've already had one. So it will still be cheaper to switch, unless of course your "cheap" tariff has a long lock-in with expensive leaving penalties.

After all they've said about competition, the government will look silly when it ends up discouraging switching and encouraging lock-ins. Typical Cameron.

Unfortunately, 'switching' and competition have become one and the same - i.e. most think to have competition switching rates have to be high. The Switching Vultures like Uswitch (and mse?) are especially keen to increase switching, as the Uswitch rep on Radio 4 today clearly demonstrated.

Well the problem with that is that switching in itself adds a fair dollop to our bills - all those 'canny' (how I hate that word) people collecting their £70 switching cashback don't seem to be able to see past the end of their nose. The business process involved in switching is very complex with many hurdles, simply meaning there is a massive amount of manpower involved (all on your bills of course).

Instead of encouraging even more switching - the 'solution' to high bills according to the decc - the government should make switching less necessary. I believe this could easily be done by having understandable tariffs with clearly available prices instead of the confusion marketing the suppliers employ at the moment. (I thought the regulator tackled this a couple of years ago!) Simply allow the maximum number of tariffs a supplier can offer to something like 4 or 5. That should be enough choice for anybody, and would stop the weekly introduction of short lived tariffs replacing existing tariffs which are then increased.

Switching itself is a high cost burden, as well as an annual hassle.
The need for switching would be lowered by limited tariffs with clearly published pricing, and doing that would achieve what Cameron wants, i.e. more on the best tariff for them. I expect Cameron will soon see the nonsense of his proposal which, as you say, will simply die a death.

Pincher

Oh well, years of being mired in lowest denominator politics and headline grabbing soundbites has finally taken its toll on Cameron. He can no longer distinguish wishful thinking from basic economics.

What next, state dictated milk and egg prices?

He can raise the rate of VAT and import duty, and then arrest smugglers and people who buy on the black market. When you dictate prices, usually too low, businesses simply shut up shop and sell somethings else that makes more money. He ends up bailing out the energy industry, like Northern Rock, and now who has to subsidise his LOWEST tariff?

Remember Lakshmi Mittal's steel plants, he would rather shutdown French steel plants, than bleed money on wages, raw materials and sell at a loss due to oversupply. How would you like it if the power plants start shutting down? If you don't have power plants in the UK it's even easier to exit the UK energy market.

Cardew

spiro wrote: »

That doesn't always work because we pay the WFP who live in Spain or the Bahamas, thats how stupid the rules are.

As has been stated by all of the Governments since introduction of WFP, the cost of 'means testing' a small payment would greatly exceed the cost of giving it to all aged 60 and over without any scrutiny.

In any case is WFP anything to do with gas/electricty bills? It is just treated as £200 income by most people and doesn't stop the 'pensioners are freezing to death' lobby*. however it would be political suicide to stop WFP.

* My point is that if WFP was increased to, say, £1,000 it still wouldn't stop the lobby.

Wee_Pilsbury

grahamc2003 wrote: »

Unfortunately, 'switching' and competition have become one and the same - i.e. most think to have competition switching rates have to be high. The Switching Vultures like Uswitch (and mse?) are especially keen to increase switching, as the Uswitch rep on Radio 4 today clearly demonstrated.

Well the problem with that is that switching in itself adds a fair dollop to our bills - all those 'canny' (how I hate that word) people collecting their £70 switching cashback don't seem to be able to see past the end of their nose. The business process involved in switching is very complex with many hurdles, simply meaning there is a massive amount of manpower involved (all on your bills of course).

Instead of encouraging even more switching - the 'solution' to high bills according to the decc - the government should make switching less necessary. I believe this could easily be done by having understandable tariffs with clearly available prices instead of the confusion marketing the suppliers employ at the moment. (I thought the regulator tackled this a couple of years ago!) Simply allow the maximum number of tariffs a supplier can offer to something like 4 or 5. That should be enough choice for anybody, and would stop the weekly introduction of short lived tariffs replacing existing tariffs which are then increased.

Switching itself is a high cost burden, as well as an annual hassle.
The need for switching would be lowered by limited tariffs with clearly published pricing, and doing that would achieve what Cameron wants, i.e. more on the best tariff for them. I expect Cameron will soon see the nonsense of his proposal which, as you say, will simply die a death.

Couldn't have put it any better than that! The current market is effectively a cartel and the "competition" supposedly enabled by the ability to switch is essentially false. If you limit the number of tariffs to four or five it should be fairly simple to decide which one is cheapest and most suits your purposes - might not need the likes of uSwitch right enough and I don't imagine they would like that.

WestonDave

Free markets (whether you consider them optimal or not) are supposed to have price transparency to operate - we don't have that in the current system. Arguably energy is such a basic need that it needs to be a properly functioning market more than most other commodities that we buy.

I don't see fundamentally why we couldn't have a system whereby each energy company is only allowed one price for each unit of gas and one price for each unit of electricity (with a variation that they can have an all day rate and a split rate). What that would mean is that rather than competing via marketing (which adds cost) and obfuscation (confusing people), the energy suppliers would simply compete on the basis of how effective they are at securing their supplies of energy at the lowest cost, how well they can control overheads and the profit margin they add on. This would then make it much easier for the smaller up and coming companies to also compete on a level playing field - whilst stripping a fair bit of noise cost from the system such as the cost of paying for frequent switching (i.e. the admin and the bonuses).

Whether you complicate this by having a set of add ons (possibly set by Ofgem in terms of rate) is open to question (e.g. extra to cover non DD payment, pre payment meter costs etc) but at the moment the system favours a relatively small number whilst adding a fair bit of cost which we all end up paying for through the costs of switching admin, marketing and cash back.

The devil will be in the detail on this one but on a vital need item like energy, I can see some mileage in stopping the deliberate confusion being caused by multiple tariffs.

wakeupalarm

The whole idea is an admission of failure of competition. Forcing companies to offer the cheapest tariff just means the current system that they have trumpeted for years isn't working, but rather than introduce more competition by breaking the energy companies cartel up they want to keep the status quo and force customers on to pre determined (by them) tariffs.

Either break the market up into 20 companies as was the case when the energy boards were privatised or Nationalise them and go back to offering a single tariff for everyone.

Switching does not equal competition it just adds further costs into the system that weren't previously there and passes them onto people who don't switch.

As for discounts such as the Winter fuel payment, I just can't understand why they just don't add it to the state pension. You instantly get rid of the administration burden, those with higher incomes pay tax on it at the appropriate rate, it is already treated as xmas spending money by many.

undaunted

Who knew when British Gas was to be privated that they were actually talking about Cameron, our future PM.

"Soundbite Sid" is almost certainly just making ill considered promises here which he will fail to deliver upon yet again.

MillicentBystander

wakeupalarm wrote: »

The whole idea is an admission of failure of competition. Forcing companies to offer the cheapest tariff just means the current system that they have trumpeted for years isn't working, but rather than introduce more competition by breaking the energy companies cartel up they want to keep the status quo and force customers on to pre determined (by them) tariffs.

Either break the market up into 20 companies as was the case when the energy boards were privatised or Nationalise them and go back to offering a single tariff for everyone.

Switching does not equal competition it just adds further costs into the system that weren't previously there and passes them onto people who don't switch.

As for discounts such as the Winter fuel payment, I just can't understand why they just don't add it to the state pension. You instantly get rid of the administration burden, those with higher incomes pay tax on it at the appropriate rate, it is already treated as xmas spending money by many.

Sums it up perfectly for me. De-nationalising this industry has proved to be an absolute disaster. Especially when you realise the money the Govt got for it all was basically used to fund the 3 million+ unemployed Thatcher needed to get her reactionary policies accepted. And, before anyone says it, no, I'm not claiming everything was rosy when the nation ran the industry but look at the parasitic industry that de-nationalising it has caused to be born. So many layers of **** and so many duplicated and wasteful resouces. And STILL no proper storage facilities.

spiro

In this country I suspect it would cut most peoples bills if suppliers were allowed to cut you off as soon as you dont pay your bill like they do in most other countries. Likewise we are one of only about three countries that offer PPM meters and recovering a £500 debt at £3.50pw and therefore giving the customer a 2.75yr interest loan helps no one except the small minority.