15 Jun 13

EDF Energy backs single unit price proposals to help consumers find best deals

EDF Energy has backed proposals for energy suppliers to offer a single unit price for gas and electricity - to help consumers compare different tariffs and identify the cheapest deals.


The introduction of petrol forecourt-style pricing would mean customers would only need one price - the unit price - to compare between different suppliers, making it easy to select which tariff would save them the most money.

EDF Energy is the first supplier to support the measure, which it pledged to implement if all other suppliers also committed to it. The company said it had been making the case for a single unit price to the regulator Ofgem since last year and would continue to do so. It also plans to take forward discussions with a range of consumer groups and other industry stakeholders on the proposal. Single unit pricing is also backed by the consumer group Which?


Energy prices are currently set regionally with some suppliers charging a standing charge and a price for each unit of electricity and gas consumed. Other suppliers however operate a more complex ‘two tier’ pricing structure, whereby customers are charged a lower unit rate once a certain amount of energy has been used. This makes it confusing for consumers to know which suppliers offer the best deals.

Last year, EDF Energy responded to customers’ calls for simpler charges by scrapping two tiered pricing - replacing it with a small standing charge and a unit price. It offers just two types of energy tariff: fixed and standard variable.


Now the company wants all suppliers to go further and scrap regional prices and standing charges altogether – so customers have just one simple gas and electricity price for comparison. Consumers would benefit by being able to pick out the cheapest deals – while the suppliers offering the best prices would also gain by winning more new customers. EDF Energy currently offers the cheapest standard variable dual fuel prices of all the major suppliers*. It also offers an industry-first price promise on its Blue +Price Promise tariff, where it informs customers if a tariff is launched by another supplier which could save them £1 a week or more.**


For single unit pricing to work, Ofgem would need to create a central clearing house to eliminate the regional cost differences, which currently exist due to varying cost of distributing energy to different parts of the country. And all suppliers would need to adopt the same model so consumers could compare prices against the same measurement. EDF Energy could not sign up to it alone. Suppliers, the regulator and Government would also have to work together to ensure some vulnerable high consumption users were not adversely impacted by single unit pricing.


Martin Lawrence, EDF Energy’s 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.

“Customers would be the real winners along with the companies willing to offer the 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?”


Which? executive director Richard Lloyd said: "Rising energy prices are the biggest worry for hard-pressed consumers but many people don't switch to save money because the market is too complicated, so it is good to see EDF Energy backing a single unit price for energy tariffs.


"We recently found eight in ten consumers could identify the cheapest deal when using the petrol forecourt style single unit price, and 10,000 people have already joined our campaign in support of this change. Let's hope other suppliers now follow EDF Energy’s lead and we see an end to confusing energy pricing soon."




Footnotes


* Based on national average of regional prices at typical consumption. Typical consumption as defined by Ofgem is 3,300 kWh electricity and 16,500 kWh gas consumption and 5,000 kWh of electricity for Economy 7 meters.

** Blue +Price Promise customers will be informed via email within 10 days of any deals entering the market which are £52 a year cheaper, at typical consumption. (Source: data from price comparison service provider: energylinx.) The same information will also be published on the EDF Energy website within two working days. Customers who are not online will be sent a letter within 10 days.