Energy change - my initial thoughts
The Government’s new proposals to simplify the 500 current tariffs could actually result in many more new tariffs, though this time not from suppliers.
A cursory initial reading of the announcement seems to indicate it’s heavily biased towards collective switching, where a ‘trusted’ organisation negotiates with an energy supplier to get a bespoke deal.
With energy companies only allowed four tariffs per fuel of their own, it’s likely they will work with collective switch groups to replicate their current range of tariffs. If they want to build market share and buy in new customers on a cheaper rate, they’ll do it via a collective switch as the rules allow them to do that without it needing to fit in with their standard range.
This is a big boost to the flagging collective switch system, which is struggling as providers won’t play ball, meaning no collective switch has yet offered a market-leading deal.
Will it stop the ‘regressive’ nature of energy pricing?
Yet the real question is: will it end the current system where those who are struggling and lack financial capability are paying more than many affluent, plugged-in switchers?
It certainly is likely to lead to a marginal improvement, with the advantage that some collective switches will be able to target vulnerable customers. Therefore, trusted organisations such as charities for elderly people will be able to engage in the marketplace on behalf of their constituents.
Whether energy firms will give those organisations the best prices is an open question. We once tried to set up an MSE collective switch, but suppliers wanted us to agree that once the fix/discount period ended and the rate jumped, we wouldn’t contact people to tell them to switch again. That wasn’t acceptable, so we didn’t do it. With such terms, customers may gain initially but lose later.
Will these changes result in cheaper bills?
Without collective switching, the new landscape, on first look, seems quite simple. The homogenisation of tariffs means those who switch regularly and get the cheapest deals now will pay a lot more. Those who never switch and don’t engage in the marketplace should pay a little less.
Even with collective switching, the worry is the difficulty of comparing which deal is right for you. It’s doubtful the current incarnation of comparison site models can deal with this. So we’ll have a more diffuse range of tariffs that are more difficult to compare.
However, what really counts here is how tight the regulation is in linking consumer energy pricing with wholesale prices – and there was scant mention of that.
For now though, remember nothing has actually changed, and many people are wasting £300+ a year on the wrong tariff. So if you haven’t done anything, see Cheapest Gas & Electricity.
