EDF has backed proposals to revamp the energy industry’s pricing structure by implementing a single unit plan, claiming this would simplify the market and make it easier for consumers to switch.
According to the firm – which is a member of the big six energy providers – the introduction of a pricing style similar to that found on petrol station forecourts would mean consumers only needed one price to compare between the various energy companies.
EDF says that this would help to bring more fairness to the market by making it easy to select which tariff would save them the most money – even if it meant consumers moving away from EDF to a rival firm.
Follow the leader
In backing the proposals, EDF becomes the first of the big six to do so, but says it will only pledge to implement the new structure if the other members – British Gas, E.ON, npower, ScottishPower and SSE – also agree to do so.
EDF has been lobbying with energy regulator Ofgem for a single unit price for more than a year, and says it will continue to do so, as well as taking forward discussions with consumer groups and industry stakeholders.
The move would not only require the assistance of the other big six members, but smaller suppliers also, as well as the regulator itself.
In order for the single unit pricing to work, Ofgem would need to create a central “clearing house” to eliminate regional cost differences that currently exist due to the varying cost of distributing energy to different parts of the country, EDF claims.
Furthermore, energy suppliers would need to adopt the same model so consumers could compare prices against the same measurement – a move that would require the support of suppliers, the regulator and the government, to ensure that vulnerable high consumption users would not be adversely impacted.
Martin Lawrence, EDF managing director, said: “We know many consumers are confused when it comes to identifying which tariff is the cheapest for them – which is why we back these plans to simplify the market.
“By introducing a single unit price for electricity and gas, consumers would be left in no doubt as to which suppliers were offering the best deals. There would be no hiding place.”
Mr Lawrence said that customers would be the “real winners”, should the measures be implemented, along with the companies who were willing to offer their most competitive prices.
“The question is: will other suppliers be brave enough to back this proposal and remove tariff complexity once and for all for consumers?”
Some way to go
Whether or not other suppliers will back the measures remains to be seen, but for now it appears that Ofgem – which would need to play a key part in the development of a new pricing structure – is wary of overhauling the market in such a way.
The regulator has already set out a series of reforms that will be included in the government’s upcoming Energy Bill, which includes revamping the way in which tariffs are presented and the number that suppliers can offer, and the introduction of a new single unit system would further delay the rollout.
Maxine Frerk, Ofgem’s retail markets and research partner, said a single unit price option is not as simple as it sounds, as it would not take into account discounts for things such as the consumer’s payment method and paperless billing, or dual fuel reductions.
“Our extensive consumer research indicates that customers value these discounts, and our reforms seek to deliver simplicity while retaining the choice that consumers value,” she explained.
EDF therefore has some way to go before its 5.5 million customers – and the nation’s other gas and electricity users – see a new pricing structure implemented, but the energy giant has vowed to continue fighting until it occurs.