Ofgem has defended new reforms which aim to simplify the energy market for consumers by reducing the number of plans on offer and incorporating standing charges.
The changes will see energy providers drop existing two-tier unit price plans in favour of standing charges and fixed energy unit prices. The energy regulator hopes the reforms will make it simpler for customers to compare tariffs.
New standing charges ‘discriminate against energy-efficient consumers’
Anne Thomas of the Highlands and Islands Green party recently criticised Ofgem’s reforms for discriminating “against small-use or energy-efficient consumers, who will in effect pay a higher overall unit price than bigger users, because any standing charge will form a larger proportion of the overall energy bill”.
Maxine Frerk, Partner, retail markets and research, Ofgem recently wrote a letter to The Guardian disputing the criticisms.
She said: “A standing charge is just a way of recovering overheads that are unrelated to energy use. However, there is nothing in our reforms that stops suppliers setting the standing charge at zero. Some suppliers are doing this, and if there is consumer demand for such tariffs we would expect this to continue.”
Prior to the changes, energy suppliers were able to structure tariffs in a wide variety of ways. Some contracts charged customers standing charges whereas others operated tariffs which charged per unit energy rates which varied depending on the amount of energy consumed.
Energy suppliers commit to reforms
British Gas, npower, and SSE have announced plans to reduce the overall number of plans available and will also roll out energy bills designed to be easier to understand.
Simpler energy bills are likely to be welcomed by majority of the British population with a recent uSwitch survey revealing that 86% of Brits feel the latter are too complex.