London (Platts)--20Dec2012/744 am EST/1244 GMT

Plans by the UK government to reform the country's complex array of energy tariffs is doomed to failure without additional measures to boost competition in the gas and power markets, consumer organization Which? said Thursday.

The Department of Energy and Climate Change announced plans on November 20 to force all energy suppliers to cut their tariffs to just four, including standard variable and fixed tariffs, and move customers from obsolete tariffs to better ones, all by 2014.

"There has been a collapse in trust in energy companies in the last six months. After the recent round of inflation-busting price hikes and announcements about the cost to consumers of investment in the energy system, it's no wonder people are left questioning whether the price they are paying is a fair one," Which? executive director, Richard Lloyd, said.

The UK market is dominated by six big suppliers, and many consumers complain that tariffs are complicated and difficult to compare.

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Piling pressure on the major suppliers, a key parliamentary committee on Thursday also called for greater transparency in the way they set prices and for regulator Ofgem to become more proactive.

The consumer group called on the government to introduce a single unit price for energy and make it easier for consumers to switch to the cheapest energy deal. If suppliers were forced to charge only by the unit, consumers could make easy comparisons as they do with gasoline, it said.

The Which? report said surveys showed that distrust in energy companies had seen a 19-point increase in just six months with 54% of customers now saying they didn't trust energy suppliers.

It said customers were being "bamboozled" by confusing advertising, with tempting headline price offers that could actually leave some households worse off.

"And the reality of recent average price rises in the headlines in fact varies widely depending on where you live and how much energy you use. For example, some SSE customers in the North East are facing a hike of as much as 17.15% for electricity," Which? said.

As well as calling for a single per-unit price, Which? has also called for energy companies to make tariffs available across all payment methods -- instead of the current practice where some of the better tariffs are only available online.

UNINTENDED CONSEQUENCES

Energy UK, which represents the country's energy suppliers, said it would welcome some of the consumer group's suggestions but said the move to a single unit price could have other consequences.

"The proposals in the Which? report are wide ranging. Any initiatives designed to increase competition further are welcome...Suggestions like requiring energy companies to offer single-unit pricing would make deals easier to compare but may have serious impacts on our competitive market which have to be considered very carefully," Energy UK said in a statement.

It said supplier had already cut their tariff offerings and made them simpler to compare, and that it was simple to switch suppliers. But it warned against chances that could hamper innovation in the market.

--Paul Whitehead, paul_whitehead@platts.com
--Edited by Jeremy Lovell, jeremy_lovell@platts.com

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