You may remember, back in October, an almighty hoo-hah surrounding Cameron’s pledge to for energy providers to give customers the lowest possible tariff. The whole thing was decried as a debacle by Labour and by many commentators in the media. Negative opinions abounded, with ministers describing the situation as “chaos” and claiming that the whole undertaking totally undermined principles of competition within the industry – and could even result in higher prices for customers.
This week, however, things seem to have convincingly turned around. The plans have been solidified, the core principles have been clearly outlined and many people are now feeling positive about the new route for energy tariffs. So, outside of Westminster, what does this fresh Energy Bill mean for you? And for the bills that keep on landing on your doormat? In this blog we’ll be exploring the likely outcome for you and your gas usage at home.
Just four tariffs
The proposed changes will make energy tariffs radically simpler, the energy providers will be compelled to reduce all of their tariffs to just four each for gas and electric. This will make things a lot simpler for consumers. There will be less confusion and less choice, ensuring customers are in a position to make clear informed decisions about which provider they choose and which tariff they select. In principle, this should help millions of us get a lower rate, but many energy suppliers warn that this may not be the case.
The concern is that by making it easier for every consumer to access a cheaper tariff, costs will go up as a ‘balancing act’ takes place. The cheapest available tariffs may disappear, along with the higher tariffs – forcing everyone to meet in the middle. This isn’t likely to raise your bill by much, but, if you have been particularly savvy and already found the cheapest possible tariff – you might find that you lose out.
The four tariffs which will be allowed include:
- 1 fixed price for a fixed time period rate
- 1 standard variable rate
- 2 rates based on factors like payment method/renewable issues
Depending on which is the most cost-effective option, Ofgem (the UK energy regulator) recommends that companies automatically switch clients to ensure they get the best deal. If it becomes a reality, this will have a similar outcome to the simplification of tariffs. Many will get a better rate, but some may suffer – equally (if the threats of some of the energy providers come to pass) this move could raise tariffs across the board.
Another issue is how possible this will even be. The finance and resources required to analyse and alter the tariff of each energy customer could be significant. This is one to wait and see on. Don’t worry just yet.
So what should I expect?
Overall, the impact of the Government’s proposed changes isn’t going to be felt for a good while. For the time being, your energy bill is likely to remain unchanged. The claims from the energy market that these alterations will simply raise tariffs as the lowest rate is raised to accommodate lower revenues could be idle threats. Equally, these changes could take so long to implement that we have long forgotten about them by the time they affect us. Either way, prepare to hear an awful lot more about this over the coming months. The intention is to lower energy prices for cash-strapped house holders – but the effectiveness remains to be seen.
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