Monthly Archives: November 2012

Tariff Simplification is a Red Herring.

More from the Today programme this morning on simplifying energy tariffs. Two main problems with this. Firstly it has to be based on the premise that energy isn’t complicated. Secondly it assumes that the consumer is unable to engage because their brain can’t do more than one number at once.
On the second point, to my mind it is obvious that the consumer is concerned about rising energy bills and would be willing to engage. I think the real challenge is to bring clarity to the complex ecosystem of tariffs that we have.
The main reason for the huge array of tariffs is that there are four variables interacting so you have Gas, Electricity, Meter type (prepay or credit) and payment method (direct debit at various intervals being cheapest).
Compare this with mobile phones where there are also a handful of major suppliers and this time, the interacting variables are minutes, texts, data and PAYG/Pay monthly. I for example use a fair bit of data, not so many calls and hardly any texts and I went and found a tariff that suits me. It isn’t hard to do the same sort of flowchart for energy tariffs:
– How much gas do you use? Lots/Middling/A little
– How much electricity do you use?
– How do you want to pay?
Once you know what combination of these you are, the choice of tariffs will have dropped from 400 to about 2-3 per company.
Rather than consolidating tariffs to reduce choice, rebrand them as ‘mix and match’ and make sure there are common definitions of high/medium/low consumption for gas and electric so people know what type of customer they are and hence are better able to pick a combination that is right for them.