Tuesday 6 December 2016

Flood of new energy tariffs ‘could bamboozle customers’

More than 1,300 energy tariffs are to “flood” the market as the removal of the four-tariff rule comes into effect.

Independent energy supplier First Utility warns consumers could be “completely bamboozled” as a result of Ofgem removing the restrictions.

Although the rule was officially removed last week, suppliers were free to start offering more than four tariffs per fuel in the summer.

First Utility compared the average number of tariffs per energy supplier in 2011, i.e. before Ofgem introduced rules limiting suppliers to just four tariffs each, until today.

It found there were 400 tariffs available from 13 suppliers at the time, meaning the average number of tariffs available per supplier was 31.

That has increased to 873 tariffs at an average of 20 per supplier today, it adds.

If the market returned to the previous average tariff offering before Ofgem's Retail Market Review (RMR), with 43 suppliers offering 31 tariffs each, consumers could be faced with a staggering 1,364 tariffs to choose from, according to First Utility.

The proposal to remove the four-tariff rule was suggested by the Competition and Markets Authority (CMA) which has been supported by Ofgem.

First Utility previously told ELN consumers are not engaged in the energy market because of the Big Six and believes the CMA’s proposals “do little” to engage the 70% of the large suppliers' customers who are on the most expensive tariff.

It adds the increase in tariff choices will “further confuse and turn customers off from the market” despite the savings available to those who do switch.

Ed Kamm, UK MD, First Utility said: “The CMA had a golden opportunity to make things fairer and simpler for all consumers. But their remedies do nothing to resolve what has become a ‘Tale of two markets’ - divided between those who shop around for the best deals and save hundreds and the disengaged or vulnerable who remain on the most expensive tariffs.

“The prospect of returning to the bad old days of confusion marketing, without any requirement to explain these tariffs in a way that makes sense to consumers, is hugely concerning. Why should customers be expected to wade through more than a thousand baffling options? This makes it harder for consumers to find and compare the best deals.”

Ofgem said it shares the CMA's aim of wanting suppliers to offer a wider range of "good value" tariffs to consumers.

A spokesperson added: "When the rule was put in place we said that it was not a long term solution. Removing the rule allows suppliers to offer customers more innovative tariffs as the energy market becomes smarter. This could, for example, include bundling tariffs with energy efficiency products.

"We want to help people make informed choices about how to get a better deal. As part of this each supplier will have to make it easier for customers to compare its new deals. But we don’t want to see a return to confusopoly and we will watching suppliers closely.”