Energy market reforms will raise prices, claim big six providers

The 'big six' energy suppliers claim Ofgem's plans to simplify the UK energy market will raise prices and reduce choice.

Reforms of the energy market, to limit the number of tariffs energy providers can offer, will simply reduce choice and raise prices.

That's according to the 'big six' energy providers: British Gas, SSE, npower, EDF, E.ON and Scottish Power.

Fewer tariffs for simpler comparison

At present, households can choose from hundreds of different energy tariffs from dozens of different suppliers. Unfortunately, thanks to 'paralysis by analysis', this complexity creates a market too difficult for many of us to navigate. So in an attempt to create a more competitive, open and transparent market, energy regulator Ofgem wants energy suppliers to simplify their tariffs. You can read more in New rules to limit energy tariffs suppliers can offer

In February of last year, the watchdog even threatened to impose price controls on the 'big six' unless they overhauled their tariffs. In spite of this clear threat from Ofgem, it took seven months for first mover E.ON to reduce its number of tariffs to five last September, as I explained in Simpler energy bills won't mean lower prices.

The Big Six lash out

However, in order to keep control of their lucrative market, the major energy providers have now gone on the attack.

They claim that Ofgem's latest reforms to clean up the energy market are flawed, warning that fewer tariffs could deliver higher prices and less choice to consumers. What's more, in a frankly bizarre argument, the six claim that reducing the number of industry tariffs could lead to a fall-off in switching between tariffs and suppliers.

Of course, there is an argument that limiting suppliers to a choice of only four tariffs could stifle innovation. However, since when has any innovation in energy pricing led to lower prices for consumers, rather than higher profits for suppliers?

What's more, the argument that prices could rise if tariffs are scrapped is both dishonest and hypocritical. As I warned last October, "...any wily marketing department [at the 'big six'] worth its salt would use this re-pricing exercise as an opportunity to sneak up prices across the board, rather than lowering them and losing revenue." In other words, if prices do rise, then this would largely be due to the providers' own greed.

Another spurious argument is that prices will converge, leaving little incentive for consumers to shop around for cheaper tariffs. If prices do start 'bunching' for standard tariffs, surely 'ditching and switching' will become easier after tariff simplification, not harder?

Simplify our bills

In my view, the energy market will continue to be baffling and obscure until Ofgem orders the key players to simplify their bills, as well as their tariffs.

As I argued last July in The best and worst energy bills, the quality and usefulness of the information in the bills generated by energy companies vary enormously. Until Ofgem stamps out this widespread use of 'confusion marketing', we will continue to receive obscure, opaque and complicated energy bills.

To improve consumer confidence and stimulate switching, simple and transparent bills must be a regulatory priority.

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