Ofgem hope to discourage the current practice of charging two different prices for energy in the hope that customers are able to compare figures easily to get a better deal. When they researched the matter, 7 in 10 people said they would be more likely to switch to a cheaper supplier if they were more able to understand the prices they were going to be charged.

Instead of a provider giving one initial price per unit of energy used, and then a second price which applies after a certain usage point, Ofgem propose that tariffs will be displayed as one single unit price as part of a basic tariff provision. The regulator would set the standing charge across the industry, and individual providers would be free to set their own price for actual usage. The unit price on offer could vary according to the location of the property in question.

Initial trials conducted by Ofgem show that just 44% of people surveyed were able to correctly identify the best deal by comparing current paperwork. However, 85% of people could find the best deal in less than a minute when the tariff format had been simplified.

In addition, Ofgem would like to see the information presented to customers in a clearer format. This could include forcing companies to use a similar style of layout on statements so that customers can easily compare their bills on a like-for-like basis. The proposal for clearer information also covers letters notifying customers of hikes in energy prices, and better information when their contract with a supplier is coming to an end. The words used to describe
certain aspects of the energy supply – and the bills generated – would also be standardised.

In general, Ofgem hope to promote an attitude of fairness and consideration for customers in the energy industry. Several large energy suppliers have already made changes, including cutting the number of tariffs they offer and ending the controversial practice of doorstep selling.

British Gas cut their tariff offerings to just two different provisions, and E.ON have announced a complete review of their customer service provision and the way they interact with consumers.

Chief Executive of Ofgem Alistair Buchanan said that he was encouraged that energy companies were already reacting to their findings, and he hoped that they would continue to support the progress that had been made.

Last month, the prime minister David Cameron said he supported the move towards simpler energy pricing, and Consumer Focus today said they would “keep a watchful eye” on progress.

The Ofgem proposals will now be scrutinised for three months before it is decided whether the industry will go ahead with the plans. If the industry agrees with the proposals, any household which is currently on a Standard tariff would be automatically switched over to the new, simplified version when the new rules come into force.