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Goodbye market competition for energy?

The PM insists he will force energy companies to lower their prices

October 18, 2012

David Cameron’s announcement that he will make energy companies offer their cheapest tariffs to customers is both bold and baffling. Bold because it flies in the face of decades of successive governments claiming the ‘market’ will ensure low prices for consumers, without the  need for the heavy hand of state interference.  And his announcement is baffling as it is difficult to see how the policy can be enforced. Will there be energy price officers monitoring the Internet waiting to swoop on any companies that offer contracts above the market floor?

The real problem facing the government is that energy deals have become fearsomely complex making it difficult to know in simple terms how much homeowners will pay. Dual fuel contracts and direct debit offers complicate the sums making simple comparisons tricky. The British Gas website today offers 5 tariffs, one even called ‘Clear and Simple’ which suggests the company knows the other four  are neither clear nor simple. Two are higher fixed rate tariffs  with contracts lasting up-to 2 years and an option for prices to fall, but not rise. Another is a discount variable offering 2 years reduction of 4 percent on the Clear and Simple rate. The final offer,  said to be the cheapest, is available only  to online customers. British Gas is just one of many suppliers out there offering such deals. How can a normal customer be expected to see there way through the maze?

Maybe the PM has the answer, maybe he will wave the wand and we will all be switched onto the lowest energy price. But everyone  is now waiting to see how exactly he will pull this  trick off.

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