13 December 2018 09:42:07 GMT

The Third Rock Forum - Ethics


Latest Article

Title : What to do about the energy companies

Item is Approved.

Date Submitted : 05-10-2017 15:24
Author : Paul G

The government, and indeed the opposition, are wrestling with the problem of energy (gas and electricity) prices. 

The Conservatives know that, for the market to function efficiently there must be competition.  But most people cannot chose between suppliers because the tariffs are so complicated they can’t take an informed decision.  And, as in so many cases,  inertia works in the energy companies’ favour.

Labour and the Conservatives in their frustration, are thinking of introducing a cap but a cap is a crude device which artificially blocks the normal market mechanisms and can actually give consumers a worse deal.

What can we do? How can we simplify tariffs so users can make informed decisions while at the same time cutting users’ energy bills.

It’s simple.  We force energy companies to calculate bills on the basis of energy used, giving every consumer the best deal they offer. In other words, instead of asking the consuming to find the best deal on offer by calculating how much energy they will use, at what time, and in what way, we simply compel the energy companies to do the calculation and apply the best tariff they offer to every customer.

If the customer is already with a company (i.e. the majority of consumers), the customer could  ask for, in a standard format, full details of their usage and the best price the company can offer for the next year The user could then forward the letter or email to other suppliers to get their best competitive quote.

What will happen?  The plethora of tariffs will disappear because the main purpose of the complex tariffs on offer is to confuse consumers, to make comparisons difficult and to make more profit by ensuring most users are NOT on the best deal.  If the energy companies have to give everyone their best deal for their usage pattern, they will quickly realise that  there’s no point in all those complex and confusing tariffs.

Instead, each company will offer only two or three tariffs.  Price comparisons will be much easier.  Changing supplier will become more popular. And prices will fall.

The objectives will be achieved by exploiting rather than interfering with the market mechanisms.