Government to make energy firms give customers lowest tariffs

LONDON Thu Oct 18, 2012 9:50am BST

Lit hobs glow from an electric cooker in this file photo. REUTERS/files

Lit hobs glow from an electric cooker in this file photo.

Credit: Reuters/files

Related Topics

Quotes

   

LONDON (Reuters) - The government will introduce laws to make energy suppliers give customers the cheapest tariffs, in a fresh attempt to drive down prices for consumers, Prime Minister David Cameron said on Wednesday.

Cameron made the announcement, without giving further details, after a number of energy companies said in recent days they were raising retail gas and electricity prices.

"I can announce that we will be legislating so that energy companies have to give the lowest tariff to their customers," Cameron told parliament during his weekly question and answer session.

Officials said the government would issue further information on the measures nearer the publication of an Energy Bill containing the legislation later this year.

The aim was to make sure more customers took advantage of the best available tariffs offered by energy suppliers, the officials said.

At present just 15 percent of British households switch supplier in search of better rates, leading to concern that many consumers, including the most vulnerable, were paying too much.

"We will talk to companies and others about the details, and precisely how we put this into law, but the objective is very clear," Cameron's spokesman said.

However, the limited information available led one consumer group, uSwitch, which runs a comparison website, to say the policy would actually disadvantage consumers.

"This has to be a mistake - the unintended consequences would be to kill competition," said Anne Robinson, director of consumer policy at uSwitch.

"Consumers will be left with Hobson's choice - there will be no spur, no choice, no innovation and no reason for consumers to engage any more," Robinson said.

A Department of Energy (DECC) spokesman said the government had no intention of ending competition and was looking "at all options" to help consumers get the best tariff, which not might necessarily be the cheapest.

Some households might not want to pay their bills by automatic direct debit to their banks - often the cheapest option - or would want to take energy only from green sources, the spokesman added.

BEST TARIFF

There have been repeated attempts by successive governments to use competition between suppliers to restrain prices.

In April, Deputy Prime Minister Nick Clegg announced that energy firms would be required to contact consumers once a year with details of the best tariff on offer.

However, this had failed to encourage more than a small proportion of consumers to switch supplier and the government had decided to take firmer action, a spokesman for Cameron said.

"We need to place more obligation on the companies. At the moment, everything is down to the consumer, and it is up to the consumer to access and find the best deal," Cameron's spokesman said.

"We feel we need to go further and make the energy companies responsible for making this happen," he added.

Energy UK, Britain's energy industry trade association, said it was too early to tell what the impact of the legislation would be on its members, which include all of the country's so-called big six energy providers.

Utility SSE (SSE.L) said it hoped the government's announcement heralded an end to differential pricing, which it said some rivals practiced.

"For too long some companies have undercharged, in particular, customers who sign up online, at the expense of those without access to the internet," SSE said in a statement

The country's largest natural gas supplier, British Gas, was not immediately available for comment.

Consumer group Which? said Cameron's announcement was a sign that the prime minister acknowledged that competition in Britain's energy retail market "had failed".

"This is a big moment for consumers," said Which? executive director, Richard Lloyd, who wrote to Cameron on Wednesday demanding an independent review of the energy market.

(Reporting by Tim Castle, additional reporting by Susanna Twidale and Oleg Vukmanovic; Editing by Anthony Barker)

FILED UNDER: