Millions of households are set to lose discounts worth up to £130 on their energy bills as David Cameron’s calls for simpler gas and electricity deals threatens to backfire. Mr Cameron and Chris Huhne, the former Energy Secretary, suggested simplifying deals would lead help people to save money.
Consumer groups yesterday waned that government plans to offer fewer, simpler tarrifs will leave many people “much worse off” as energy companies scrap discounts and cheaper online deals.
The warning comes as the Prime Minister prepares to meet the bosses of Britain’s biggest energy companies to discuss soaring gas and electricity bills, which remain at near highs of £1,300 a year per household.
However, the Daily Telegraph has learned that major suppliers have already begun quietly removing their best tariffs from the market, including many “fixed” and online saver deals.
According to Uswitch, the price comparison website, hundreds of thousands of British Gas, E.On and EDF customers have seen the very cheapest bills rise by an average of £249 since September 2010, a third more than customers on standard tarrifs.
In a second blow for bill-payers Ofgem, the energy regulator, is trying to abolish discounts worth up to £130 for around 20 million customers on standard gas and electricity deals.
Four in five British homes are on these deals, qualifying for discounts if they have “dual fuel” accounts, settle bills promptly and opt for paperless billing.
Under current plans, customers on these tariffs would no longer get money off for any of these options.
They would also lose discounts for using energy at off-peak times, collecting loyalty points or low consumption rates.
The plans were drawn up by Ofgem, after the Prime Minister last year urged companies to “clear up their bewildering array of tariffs and special offers”.
Mr Cameron and Chris Huhne, the former Energy Secretary, suggested simplifying deals would lead more people to switch their supplier and ultimately save people money.
Since then, Ofgem has argued that scrapping discounts on standard tariffs will give a single clear rate that can be quickly compared across all suppliers.
However, it also acknowledges the loss of discounts risks “frustrating a significant number of consumers”.
The energy regulator’s own research admits it “could attract a backlash from people who could blame Ofgem for increasing their bills”.
The proposals have also been criticised by groups such as Consumer Focus, which argues the loss of existing discounts could leave some groups of customers “much worse off”.
Ian Peters, managing director of British Gas Energy, warns of “unintended consequences” if the plans are allowed to go ahead.
He said many customers would “immediately lose cash discounts” of almost £70 a year for online and duel fuel accounts.
Many could see further bill increases by losing prompt payment, off-peak or other discounts.
The Government is under pressure to encourage people to shop around for good deals, after the level of people switching supplier this year dropped to an all-time low.
It argues getting rid of loss-leading bargains could help small suppliers break into a market dominated by the “Big Six” – British Gas, E.ON, npower, Scottish Power, SSE and EDF Energy.
Millions of standard tariff customers set to lose their discounts could also be more likely to shop around for bargain “fixed price” deals from alternative suppliers.
However, many of the best discount deals have been withdrawn after companies responded to Mr Cameron’s calls for a simpler market.