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Gov't proposes 'bonfire' of the energy tariffs

Ever wondered if you are on the cheapest tariff for your gas or electricity? Even gone as far as using a price comparison website? Then you would have come face to face with the bewildering array of tariffs out there. Ofgem reported that in October 2012 there were 410 'live' tariffs to choose from, and a further 650 'dead' tariffs - these are standard variable rate tariffs that serve existing customers but are closed to new ones. So, in November 2012 the Energy Secretary Ed Davey announced proposals that will radically simplify the system, and force energy companies to offer just four 'core tariffs' for gas and electricity.

Ed Davey: 'For too long people have been stuck on the wrong type of energy tariff, paying more than they need to.'

Switching saves £72 on averageEd Davey

In a statement he said: 'I am determined to ensure that all consumers get a better deal on their energy bills and get the cheapest tariff they can.' The hope is that this simplicity, coupled with clearer information about the options available to each customer, will make it much easier to compare tariffs and suppliers, and ensure the most economical deal. Ofgem estimated that consumers could currently save £72 a year on average by switching to the cheapest deal on the market.

Four 'core' tariffs

Measures included in the proposals include:

  • Each supplier to be restricted to four 'core' tariffs, including one standard variable rate and one fixed-term/fixed-price tariff; the other two tariffs would be at the discretion of the supplier, e.g. 'green' tariffs
  • A single price to be offered for each type of tarif
  • Suppliers forced to close poor value 'dead' tariffs and move customers to current ones
  • Encourage the use of technology such as smart phones to make switching easier

The proposals also aim to encourage one-off deals being struck through collective switching schemes. The intention is that all customers will be placed on the cheapest available tariff of their choice by summer 2014. Further details about the proposed changes are on the DECC website.