The U.K. will seek to ensure gas and power suppliers charge consumers their lowest tariffs starting from the summer after the regulator said prices are set to rise.
Suppliers need to cut the number of tariffs they offer for each fuel to four to make it easier to compare competing prices, as well as printing their cheapest tariffs on customers’ bills, Ofgem, the country’s watchdog, said today in a statement.
The government faces pressure to cap household bills after Ofgem said Feb. 19 that families will pay more as gas imports rise and aging oil and coal-fired power stations shut. About a fifth of power stations will retire in the next decade, adding urgency to efforts to drive through an energy bill to spur 110 billion pounds ($168 billion) of investment in new generation.
The six major energy suppliers in the U.K., including Electricite de France SA, EON SE, SSE Plc (SSE) and Centrica Plc (CNA)’s British Gas, all announced price increases last year.
“We are now counting down to the most radical shake-up of the energy retail market since competition began,” Alistair Buchanan, Ofgem chief executive officer, said in the statement.
The proposals will go through a consultation process before the decision on whether to implement them is published in May.
They would also scrap so-called dead tariffs, rates paid by current consumers that are worse value than the prices offered to new customers. Discounts for buying power and gas from the same supplier will be simplified, while Ofgem will be able to fine companies that fail to treat customers fairly, it said.
Some changes, including the cap on the number of tariffs offered, would be in place from the winter, the regulator said.
“We expect that these proposals will in general only cause further convergence on pricing between energy suppliers over time and therefore less incentive to switch suppliers,” Sofia Savvantidou, a London-based analyst at Citigroup Global Markets Ltd., said today in an e-mailed report to investors.
The proposals add to the Green Deal program to encourage households to boost energy efficiency with measures such as wall insulation, Energy Secretary Edward Davey said in a statement.
“The package announced today is a huge step towards energy bills that are more fair for everyone,” Prime Minister David Cameron said in the statement. The government will use powers in its energy bill to ensure the measures take effect, he said.
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