Which? : Ofgem's energy plans could cost consumers £55m

joncombe

michaels wrote: »

there are fixed costs so surely fairness suggests that charges should reflect this cost rather than only being levied on the amount of gas used?

If that were the case we'd see those in rural areas charged a lot more than in urban areas. It must cost a lot more to run gas pipes or electricity cables to small and often remote communities than it does to urban areas. So then more miles of cable/pipeline to look after for fewer customers. Similarly it must cost a lot more to read the meter of a property in a remote rural area than in a built up urban area. Yet prices are the same for urban areas and small villages. There are all sorts of "cross subsidies" going on already if you think about it.

I don't think the cost of billing should be very high. For an on-line tariff it's the cost of developing the website and billing system which should not be high given it'a simple calculation of units used * unit price. Customer gives readings on the website, bills are issued electronically via the website or email. Customer Services should only be needed for customers that have problems, keep those to a minimum and you keep down the costs of customer services. Yes maintaining the pipes costs a bit more but at the moment I could stop taking gas altogether but the gas pipes down the street still need to be maintained but I'd no longer be paying for it. I simply don't believe the costs of reading the meter occasionally, issuing bills electronically occasionaly (twice per year for me) and running customer services justifies a standing charge of nearly £200 a year for gas alone. I don't have to pay to have a bank statement produced even if I make no transactions. I don't have to pay the cost of issuing a receipt when buying something, these small costs are I imagine covered by the charges already. I don't see why gas/electric should be any different. If there are properties that haven't used gas or electricity for a while why not disconnect them?

An alternative, why not make the standing charge inclusive of some units (like a mobile phone with inclusive minutes)? So I pay say a standing charge of £15 per month (about what NPower are going to charge) but my first X units are free?

DragonQ

Although it makes sense for a 1-tier system to be put in place for the consumer's benefit, I can't see any of the big suppliers wanting this - it'd be far too simple for people to see which is the cheapest supplier and switch to them. Right now, it takes effort (even if that effort is small thanks to comparison sites), so most people don't bother.

I'm actually a bit annoyed that Ofgem's proposals call for a standing charge and single unit price - my current electricity tariff is the cheapest for my usage and has no standing charge but two unit prices. So I'd inevitably end up paying more under these proposals.

MillicentBystander

wakeupalarm wrote: »

Your being patronising MillicentBystander, why not address michaels points about the cost of maintaining pipes, meters, billing costs, etc?

Those that use a service more *should* pay more towards its upkeep imo. If we are to get down to the absolute nitty gritty the people with massive consumption obviously use the pipes/infrastructure more and at greater volume so *should* pay more for their upkeep. This is not really rocket science.

MillicentBystander

DragonQ wrote: »

Although it makes sense for a 1-tier system to be put in place for the consumer's benefit, I can't see any of the big suppliers wanting this - it'd be far too simple for people to see which is the cheapest supplier and switch to them. Right now, it takes effort (even if that effort is small thanks to comparison sites), so most people don't bother.

I'm actually a bit annoyed that Ofgem's proposals call for a standing charge and single unit price - my current electricity tariff is the cheapest for my usage and has no standing charge but two unit prices. So I'd inevitably end up paying more under these proposals.

Hit the nail on the head there! A 1-tier tariff across the whole industry would mean they really would have to compete for a change. At the moment we have a Big 6 who each have millions of customers (most of them legacy ones) from which they price their product by an amount above cost to make approx £50 per household. It's easy peasy, they make the occasional attempt at making it look like they are really competing by pushing a new tariff to the top of the switching sites for a few weeks but fact is most of them are entirely happy with their captive audience of a few million because if they *really* went for it with a truly competitive market there would vbery probably be casualties. At the moment it's a pretty cosy and cushty industry to be in.

JSR

It's not complexity, it's laziness. It doesn't take 5 minutes to review the market and find the best deal for you. No amount of dumbing down is going to change that.

This kerfuffle over tariffs is all a smokescreen to hide the fact we waste far too much energy because of shoddy housing and have far too great a dependency on fossil fuels and nobody is doing anything about it.

If Ofgem want to do anything they should regulate to speed up the switching process so customers can respond more quickly to changes in the market. You don't have to give your last petrol station 6 weeks notice!

jamesd

Putting the cheapest deal from all suppliers on your bill, based on your actual usage, seems like an excellent approach and is what Ofgem is proposing to do.

Ofgem has replied to the Which claim: Claims by Which? that Ofgem's plans could cost consumers £55m misrepresents our reforms: "Claims in media reports that Ofgem’s reforms will lead to higher prices for energy consumers are mistaken. Most people currently don't engage with the energy market; Ofgem’s reforms aim to change this and make the market simpler, clearer and fairer.

...this particular analysis misrepresents our plans, and the statistics regarding a supposed loss to consumers are meaningless. To simplify the market even further we are taking forward innovative proposals which include looking at putting the market cheapest deal on consumers bills - even if it is from a rival supplier. This would remove the need to compare tariffs altogether."

Sticking the best price from all suppliers based on your usage on your bills, along with say a quick response phone number to call to switch, seems like an excellent way to go that will help those who are online or offline users of fuel. Placing it at the top of the bill or statement "You can probably save £x by switching to this supplier, phone abc to switch now" is the sort of thing that studies for regulators have found can produce high uptake by consumers compared to other approaches.

Earlier version:

Ofgem seems to have a good proposal, which it claims that Which is misrepresenting:
"an Ofgem spokesman said the reforms would "deliver a simpler, clearer and fairer energy market for consumers and will make it much easier for consumers to choose the right deal for them".

He added: "Which? is misrepresenting the purpose of the tariff comparison rate and how it fits into the full scope of Ofgem's reform package. The tariff comparison rate acts as a prompt to consumers to take a look at comparative deals.

"The tool is similar to the 'typical APR' used in financial services marketing. But it is partnered with personalised consumption information necessary to make a full and accurate cross market comparison, which every supplier must provide via bills and annual statements. Ofgem's reforms will also see suppliers' cheapest deals on your bill.

"We share the desire with Which? to see an at-a-glance tariff comparison. We are taking forward our innovative proposals to put the market cheapest deal on consumers bills - even if it is from a rival supplier - and this will remove the need to compare tariffs altogether. We hope Which? will respond positively to our invite to them to join this next stage of our work.""

Which seems set on having one price rather than the best price for each household.

Having an alternative all-inclusive price with no standing charge that those with no usage history can use, as proposed by Which, also seems to be potentially useful. But not to the exclusion of best deals for each household based on their own usage.

pdfbt40

To be honest, I've never had a problem comparing tariffs, however they are organised. What I do find frustrating is that even the major suppliers insist on doing a savings comparison; all I want is the bare tariff - SC, Units Costs per Kwh.
However what does upset me with the current 4 tariff offers is the lack now of Standing Charge tariffs, particularly for Gas. Why, the house I rent only has a gas hob (electric oven and microwave). I don't want to be paying 25p per day for the odd fried egg !
The other thing I do have difficulty with is the various discounts for DD, Duel Fuel, Nectar Points. They are sprayed all over the quote and tariff. Makes it very difficult to get an equitable comparison.

DragonQ

pdfbt40 wrote: »

However what does upset me with the current 4 tariff offers is the lack now of Standing Charge tariffs, particularly for Gas. Why, the house I rent only has a gas hob (electric oven and microwave). I don't want to be paying 25p per day for the odd fried egg !

Do you not use gas for central heating then? If it really is only the hob you use it for then you must be a very low user. In this case, Ebico would almost certainly be the cheapest (no standing charge, single rate of ~5p/kWh).