Richard Lloyd: Need for simpler and fairer energy tariffs

SSE, one of Britain's 'big six' energy suppliers, has been fined for 'prolonged and extensive' mis-selling. Picture: PA
SSE, one of Britain's 'big six' energy suppliers, has been fined for 'prolonged and extensive' mis-selling. Picture: PA
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This week’s £10.5 million fine by Ofgem of the UK’s second-biggest energy company, SSE, for mis-selling comes at a time when consumer confidence in the energy market is at rock-bottom.

This record fine might send out a public message to the energy industry that such bad practice is unacceptable, but it is too little, too late for those customers who were mis-sold.

Rising energy prices consistently rate as one of the top financial concerns for people, and so they will rightly question whether the price they are paying for their energy is a fair one when they see inflation-busting price hikes and big profit ­announcements.

The energy sector has seen a big drop in consumer trust over the past few months, with few industries currently as unpopular. Our findings reveal that less than a quarter of people trust the energy sector, beaten only by the likes of politicians and journalists in the trust stakes.

It is, therefore, hardly surprising that consumers are not
engaging with this market.

As many as three-quarters of people are stuck on the most expensive standard tariffs and, according to Ofgem, six out of ten consumers have never switched their energy supplier.

Many consumers feel bamboozled by the vast array of different tariffs available, and our research recently found that only one in ten people were able to spot the cheapest tariff.

Getting clear information from suppliers about the best deal can also be a challenge.

For example, as part of our 2011 telesales investigation, we found Southern Electric only told us of its cheapest tariff in a quarter of the calls made, but our latest telesales investigation in February 2013 showed improvements with Southern Electric (owned by SSE) giving us the best deal in all the calls we made.

While Ofgem’s plans to introduce simpler energy tariffs are a step in the right direction, there is a real danger that they will fail to live up to the Prime Minister’s promise of fairer bills because of the lack of competition in this broken market.

There’s still nothing to stop customers simply being put on their current suppliers’ “best” uncompetitive deal.

The government must take more radical action to provide not just simpler, but fairer tariffs.

Which? believes prices will only be kept as low as possible if there is more effective competition and switching between ­energy companies. For this to happen we want the price of every tariff presented in a clear, consistent and simple way – just like they are for petrol and diesel on garage forecourt displays.

The government must act now and introduce a single unit price to help people get the cheapest deal and rebuild consumer confidence.

With three more investigations into mis-selling in the energy industry currently under way, as well as the investigation into the manipulation of the wholesale market, it’s clear bad behaviour in this market isn’t limited to SSE.

Ultimately if Ofgem’s current proposals fail to fix the energy retail market by 2015, the government must step in and guarantee a fair price for all.

• Richard Lloyd is Executive director of Which?