As we finally emerge from what felt like a never ending winter, many consumers are rightly concerned about the energy bills landing on their doormats.
In Government I’m doing everything I can to ‘cushion’ people from bill increases. Wholesale energy prices make up nearly half of the typical household bill and controlling the recent increases is outside of our control. However, there’s a whole range of measures that we’re introducing to help people to keep their homes warm and their bills down – particularly the Green Deal, with the latest figures showing a very encouraging start. Already, more than 18,000 people have had assessments carried out on their homes.
Yesterday my Department launched a range of new measures to make tariff switching even simpler.
A massive 84% of households don’t switch and they could be missing out on better deals saving them up to £158 per year. We’ve announced that Government will give full backing to Ofgem’s proposals on tariff reform, and powers in the Energy Bill will ensure there will be no watering down and no delay in consumers getting the full benefits of the reforms.
The new measures will begin to take effect this summer putting more power into consumers’ hands.
People will no longer be stuck on ‘dead’ tariffs, and they will automatically be moved to the suppliers’ cheapest variable rate. There are also new measures to cut the number of core tariffs to four per gas and electricity supplier and make bills far easier to understand, including electronic information allowing price comparisons to be made at the swipe of a smart phone.
Tariff reform alone may still not be enough – we have to use every tool in the box to make it simple to switch. That’s why I’ve announced a £900,000 ‘Big Energy Saving Network’ that will work with voluntary organisations and community groups to help vulnerable consumers become savvy switchers and seek out the best deals.
We are also analysing the first results of ‘collective switching’ which has seen communities across the country get together and boost their energy buying power. The results of two early schemes are impressive; consumers are finding they could switch and save up to £223 per household.
Consumers also need greater assurances that they’ll get treated fairly by energy suppliers and that the switching sites they use are genuine. We’ve introduced two measures in the Energy Bill to protect consumers. Ofgem will be given new powers to crack down on any rogue switching sites, and when energy suppliers break the rules, customers can now be directly compensated. This would be in addition to the hefty fines that can already be imposed.
This package of measures balance the scales and puts more power in the hands of consumers, and bolsters the protection they need to ensure they won’t be ripped off.
* Ed Davey is the MP for Kingston & Surbiton and Leader of the Liberal Democrats
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16 Comments
If we want prices to fall we need a more flexible consumer market. If I can only switch tarriffs once a year there is little in the way of real competition. Limit contracts to 3 months and prices will drop fast.
I’ve got a solution to exorbitant utility prices, Ed – renationalise gas, electricity and water, pay off shareholders with a one-off bonus. Then all those profits will go back into the exchequer and help pay off the national debt. Result!
Ed – stop blaming the consumer for not switching. Why should consumers have to waste their valuable time switching between members of a ‘cartel’?
Actually there are some electricity consumers out there for whom it would actually cost more to switch since companies don’t offer certain types of tariff to new consumers. e.g. what used to be called economy 10 or warmwise tariffs for consumers using electric storage heating – better for some than economy 7 because of inclusion of an afternoon boost.
Corporatism? Statism? I am afraid to say that all parties have completely lost the plot on energy reform. All of these complicated, state controlled, tax consuming desperate measures won’t make much of a net difference at all.
The only solution is to reduce carbon taxes, increase the number of suppliers or renationalise. These are simple things.
Aye noncomformistradical, we’ve got better things to do than constantly switching to save a few pounds.
Can anyone tell me what advantage there is to our society or nation in having six sets of ‘big players’ each with a (due to inertia) ‘captive ‘home market notionally ‘competing’ for the right to send bills to people for electricity which all comes from the same place at the same average ‘price’? Almost as useful as giving a massive state subsidy to the monopolists who don’t even bother to compete with each other who sell us water and sewage. 🙁
“Already, more than 18,000 people have had assessments carried out on their homes.”
Ed, I’m one of those 18,000 and although I’m not a big energy consumer, I have to say it’s not going to revolutionise the UK’s energy usage, if my experience is anything to go by.
The report suggested two measures: interior wall insulation and replacing some remaining lightbulbs with energy efficient ones. The second is pretty easy, the first would have cost thousands, reduced space in my flat and have had a payback period of several decades.
18,000 out of a housing stock of millions is a tiny figure and while in theory the Green Deal is a good idea, I just have a nasty feeling that in practice it is going to turn out to be one of the Coalition’s greatest flops.
@RC
“The report suggested two measures: interior wall insulation and replacing some remaining lightbulbs with energy efficient ones. The second is pretty easy, the first would have cost thousands, reduced space in my flat and have had a payback period of several decades. ”
The real issue is why your flat (like all too many other properties) wasn’t properly insulated in the first place.
The market is broken and switching is not going to fix it. Neither wil penalising lower usage by making fixed elements of tariffs mandatory. Jailtime for pricefixing would help. When did that last happen here?
@ Nonconformistradical
“The real issue is why your flat (like all too many other properties) wasn’t properly insulated in the first place.”
Er, because the building was constructed in 1897, perhaps?
Ed, if you are really serious about reducing energy bills then:
1. Pull the plug on ALL government imposed subsidies for wind and other technologies that have been proven by the NETA data to be pointless.
2. Pull the plug on the wasting of circa £12bn on installing smart meters, that is also coming from our energy bills.
3. Spend the money saved on creating new generating capacity (to replace that which is coming to its end of life) and energy saving schemes that actually help people to reduce their use of energy.
I have a Georgian flat, 40% of the energy goes through the walls, I was told by my energy company I heat the pavement outside.
If the shutters worked that would help, if the ceilings were lowered that would help, dry lining of walls that would help, if I had another social housing property that would help. I happen to agree with these properties being used for other than social housing, but we have problems in that area. In our Lib Dem area, we have the Inspector, he is to sort out our problems, we hope. Much object to the proposed housing issue,
But as a pensioner I must say I have been again, totally frozen all winter, but I am grateful that I still an here to complain. Cold can kill, no matter how or what the age, it should be noted and taken on board.
Mr Davey, me changing supplier would be useless, it would not matter on the subject of the huge bills, simply because there is not insulation, and only a single wall to the back of the property, around 6 inches in old terms.
I expect abuse for this but….
In the light of the relentless rise in wholesale energy costs, over which even governments, let alone energy companies, have pretty much no control, there’s simply no magic bullet that’s going to reduce bills. What the government is doing is in my view sensible, even if it won’t reduce bills by the margins people would like.
In particular, the Green deal is very sensible but needs to be publicised more. The biggest reason people don’t pay to improve the energy efficiency of their home is the massive one-off cost. Also they know that while the benefits in reduced bills will be gained over a number of years, the cost is upfront. The Green deal addresses this problem and very well in my opinion.
To those with “easy” solutions, like renationalising energy companies, the reality is that margins in the supply of gas and electricity to homes are quite slim – typically about 5%. This is after the costs of wholesale energy, transportation & distribution (which in the UK are centralised and out of the direct control of energy companies) and an enormous level of taxes. While wholesale prices in the UK are very high (partly because we’re an island, partly because North Sea gas is running out), prices paid by consumers in the UK are relatively low compared with other countries in Western Europe. Whatever else is wrong with energy markets, the solution isn’t less competition.
I’m curious. If I think about something like my food bill, it is pretty obvious that I am exposed to fuel and power prices through that. The same must be true in other parts of my household expenses too. So I wonder, to what extent am I indirectly exposed to fuel and power prices? And therefore, to what extent will direct help to the consumer assist, and to what extent in fact do I want to see a better-functioning market which decreases supply prices generally?
Julian, I respect people who say what they feel even if they expect abuse for it, politics would be far better if more people did this, rather than worrying about the the whip or impending elections.
To counter your argument I would say that it is better to have state run industries than monopolistic or oligopolistic industries.
It is fine to have a monopoly in something like space tourism, because their market is not space tourism, but leisure. However the problem with the energy sector is that we are all dependent upon it, there is no alternative and so overly powerful companies are more likely to exploit the public?
Therefore, in my mind, the solution is either break them up or nationalise. Same goes for an uncomfortably large number of sectors in the UK…
@Eddie
“To counter your argument I would say that it is better to have state run industries than monopolistic or oligopolistic industries.”
Given the history of state run industries, I wouldn’t want to go there. However, the Post Office, does give the coalition the opportunity to explore a third way – privatisation to a CIC, with an ESOP consisting of at least 10% of the issued share capital (circa 30% has a nice feeling to it)…