Energy firms must offer (not give) cheapest deals, says Ofgem

The watchdog's proposals, published today, which also include moves to simplify tariffs, come after Prime Minister David Cameron said on Wednesday he would legislate to force energy firms to actually give customers their best-possible tariffs.

Cameron's proposal went one step further than Ofgem's plans, which only state firms must tell customers about their best deals.

However, confusion reigned yesterday over Cameron's plans. Energy Minister John Hayes said the Government would consider a number of options, when pressed by Labour on whether or not it would introduce a law to compel providers to hand out their top tariffs.

Energy is a hot topic this week after a string of price hike announcements by the major power firms. On Monday, Scottish & Southern Energy became the first to raise prices in this round, by an average 9%.

See Martin Lewis's blog for a full analysis of the PM's plan.

Ofgem will consult on a package of plans, which include:

• Making suppliers tell customers about the cheapest tariff they have.

• A trial to make suppliers tell vulnerable consumers and those who haven't switched for a long time about the cheapest tariff across the whole market.

• Ordering firms to limit the number of deals they offer to four per fuel, amid widespread consumer confusion.

• Stopping providers from charging different rates depending on how much energy they consume. Currently, some charge more for the first set of units which means low users pay disproportionately more.

• Discounts for taking gas and electricity together will be displayed in pounds and pence, not lumped into the package price.

The proposals will be published before the end of October and put up for consultation, with the new regime to begin by summer 2013.

Customers should act

Archna Luthra, MoneySavingExpert.com's consumer products analyst, says: "Cameron seems to have stolen Ofgem's thunder somewhat. It's still not clear what suppliers will actually be expected to do and whether that will be legislated for or just asked for.

"But consumers should just focus on sorting bills for now. This is especially important for those on a standard tariff.

"If that's you, do a comparison to find the cheapest fixed rate deal.  There’s still a window of opportunity to lock in cheap prices, guarantee no rises for two winters and save £100s."

For information on cheap fixed rate deals, see our Cheap Gas & Electricity guide.

Alistair Buchanan, Ofgem chief executive, says: "Our plans will put an end to consumers being confused by complex tariffs and will usher in a simpler, clearer, fairer and more competitive energy market for all consumers."

Some suppliers have already taken steps to simply their tariffs. Eon cut the number of tariffs it offers from 11 to seven last month, which mirrored some of its rivals' earlier moves.

The Government's energy summit last year also called on firms to encourage switching, but many believe this hasn't worked.

Ann Robinson, from price comparison site uSwitch.com, says: "Putting simplicity, clarity and fairness back into the energy market will help rebuild trust and give consumers the tools and confidence they need to engage."