Ofgem encourages domestic consumers to switch away from standard tariffs

Energy regulator Ofgem has taken a significant step to increase transparency on prices within the UK domestic energy market. It has published an energy supplier league table which – while falling short of listing all current tariff prices – allows a comparison of the average bill paid by someone on a standard variable tariff from the larger energy companies with the deals available from the cheapest suppliers.

Meanwhile one of the smaller suppliers, Green Energy UK, has moved the market along by offering residential electricity customers a new ‘time of day’ (or ‘time of use’) tariff, which differentiates prices according to the time of day.

The failure of millions of consumers to move on from the standard tariffs offered by the ‘big six’ suppliers, whether through inertia or ignorance, is thought to be the biggest failing of the domestic electricity market. The Ofgem supplier league table has been published to increase transparency on the numbers of people on expensive standard variable tariffs, according to the Department for Business, Energy and Industrial Strategy (BEIS); it should give consumers the information they need to switch supplier and save money.

The table shows that between 50% and 90% of customers of big six suppliers (proportions vary according to supplier) are still on a standard variable tariff and, for typical dual fuel customers these cost between £170 and £210 per year more than the lowest tariffs available from the 10 cheapest suppliers. Smaller savings are also available without switching supplier – every one of the large suppliers offers an alternative, cheaper tariff.

Gillian Guy, Chief Executive of Citizens Advice, said: ‘This league table will lift the lid on the price difference between standard tariffs and cheaper deals, helping those customers who are currently paying over the odds for their gas and electricity identify a better rate. We’d also like to see energy companies do more off their own back to help customers who are on a low income, like moving them to a cheaper deal.’

The league table can be viewed here 

The government is also calling for evidence on implementing better access to customers’ energy use data, so as to make switching easier. This would ensure that bill payers can access accurate electronic data on how much energy they use and share this securely with price comparison websites to help them tailor quotes to individuals, based on their actual energy use, says BEIS.

Meanwhile, Green Energy UK says it is the first UK energy supplier in the UK to use smart meter technology to offer residential customers a time of day tariff, although the principle is long-established with ‘Economy 7’ tariffs often used with electric night storage heaters.

As the price of wholesale electricity varies with the time of day, so Green Energy’s ‘TIDE’ tariff encourages consumers to vary their usage in line with this, using electricity in periods of lower demand when the price is lower. The tariff offers variable pricing during the day and at weekends, and offers the opportunity for people to benefit from some of the gains that have been promised by the introduction of smart meters, says the supplier.

Customers who have a smart meter and who sign up online to the tariff will pay 4.9 p/kWh from 11 pm to 6 am, around 30% less than the standard tariff; customers can reduce demand for power during the peak time of 4 pm to 7 pm on weekday evenings.

• New research conducted by ECTA Training suggests that more than 40% of consumers have seen a reduction in their energy bills since having a smart meter installed. A government initiative to install over 50mn smart meters in UK homes by 2020 is currently underway to enable consumers to change energy providers more easily and become more energy efficient through accurate usage monitoring.

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