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Ed Davey to set out 'cheapest energy tariff' plan Ed Davey announces 'four core tariff' plan
(about 1 hour later)
  
The government is to set out how it intends to force energy firms to offer customers the lowest suitable tariff. Energy companies will only be able to offer four tariffs each for gas and electricity under government plans to get customers a better deal on energy.
Energy Secretary Ed Davey will set out plans to fulfil the prime minister's pledge to bring in legislation. The government says it wants customers placed on the cheapest available price by summer 2014 at the latest.
He will say that companies will have to reduce the number of tariffs to four each for gas and electricity, in a bid to cut the confusing array on offer. And customers on expensive out-of-date tariffs will be switched to their supplier's cheapest standard rate.
However, consumer groups and energy firms warned it could mean some of the cheapest tariffs on offer disappear. Business and consumer groups warned the plans could mean some of the cheapest tariffs on offer disappear.
Labour welcomed plans to make tariffs simpler, but said the government also needed to reform the energy market and create a new watchdog to force companies to pass on price cuts.Labour welcomed plans to make tariffs simpler, but said the government also needed to reform the energy market and create a new watchdog to force companies to pass on price cuts.
David Cameron's pledge appeared to be a surprise to the energy department at the time. The proposals, which are expected to be included in the forthcoming Energy Bill, have been put out for consultation until January.
Automatic switch 'Clearer and easier '
In an appearance before Parliament's energy select committee, Mr Davey is expected to say that firms will offer just four core tariffs for both gas and electricity - a fixed price for a fixed term and a standard variable rate, with two others based on different criteria such as payment method or whether renewable energy is a factor. They include forcing energy firms to offer just four core tariffs for both gas and electricity - a fixed price for a fixed term and a standard variable rate, with two others based on different criteria such as payment method or whether renewable energy was a factor.
Under the plans, companies would be forced to switch customers automatically to the lowest suitable tariff unless they objected. Energy suppliers would have to offer one price for each of the four tariffs, although they could still have discounts for dual fuel or lower cost payment methods such as direct debit.
BBC deputy political editor James Landale says Downing Street insists this means Mr Cameron will have fulfilled his promise. Customers on "poor value" out-of-date tariffs, who are paying a higher rate than their supplier's cheapest standard tariff, will be switched to the cheaper rate.
"But the real test will be whether people actually see smaller bills at a time when energy prices are rising," our correspondent adds. Energy Secretary Ed Davey said: "I'm determined to ensure all consumers get a better deal on their energy bill and get the cheapest tariff they can.
Energy regulator Ofgem had been looking into pricing for some time, and published its proposals just days after Mr Cameron's pledge, but it did not go as far as the government intends to. "Bill payers will no longer face the impossible choice between hundreds of tariffs, each customer will have a maximum of four tariffs for gas or electricity per supplier to consider.
Ofgem's proposals included banning complex multi-tier tariffs, new personalised information to help consumers find their best deal, and ensuring customers default to the cheapest option at the end of a fixed-term contract. "And households will have personalised information from their supplier on their bills about the cheapest tariff the supplier offers for their payment method and the cheapest tariff overall.
"For too long, people have been stuck on the wrong type of energy tariff, paying more than they need to.
"Our new proposals will make things much clearer and easier to understand so that bill payers can get the best deal and feel the benefits in their pockets."
The government said it was building on recent proposals by the energy regulator Ofgem, which has been looking into pricing for some time.
Currently most people buy their gas and electricity from just six big suppliers, although there are smaller suppliers, amid a vast selection of tariffs.Currently most people buy their gas and electricity from just six big suppliers, although there are smaller suppliers, amid a vast selection of tariffs.
Renewable targetsRenewable targets
The structure of the charges can vary depending on payment method (by direct debit, pre-payment meter, or credit transfer such as cheque), on whether it is an internet-only tariff, which part of the country the customer lives in, if the deal involves a fixed price, when the deal was launched, how long it lasts, and so on.The structure of the charges can vary depending on payment method (by direct debit, pre-payment meter, or credit transfer such as cheque), on whether it is an internet-only tariff, which part of the country the customer lives in, if the deal involves a fixed price, when the deal was launched, how long it lasts, and so on.
Commenting ahead of the government's expected announcement, business and consumer groups warned the plans could mean energy users paying more. Commenting ahead of the government's announcement, business and consumer groups warned the plans could mean energy users paying more.
The Institute of Directors said that restricting choice would simply allow energy companies to increase their lowest tariff, ensuring a higher minimum price for consumers.The Institute of Directors said that restricting choice would simply allow energy companies to increase their lowest tariff, ensuring a higher minimum price for consumers.
"Instead, the government should be promoting competition and making it easier for new companies to enter the energy market.""Instead, the government should be promoting competition and making it easier for new companies to enter the energy market."
Angela Knight, chief executive of Energy UK, which represents the major suppliers, said any fall in energy bills could be limited because about half a bill is made up of costs other than energy - such as upgrading infrastructure, insulating homes and environmental levies.Angela Knight, chief executive of Energy UK, which represents the major suppliers, said any fall in energy bills could be limited because about half a bill is made up of costs other than energy - such as upgrading infrastructure, insulating homes and environmental levies.
Shadow energy minister Tom Greatex said: "Anything that can help simplify tariffs, and we've been calling for it for over a year, is going to be a good thing, but the devil will be in the detail.Shadow energy minister Tom Greatex said: "Anything that can help simplify tariffs, and we've been calling for it for over a year, is going to be a good thing, but the devil will be in the detail.
"And this on its own isn't going to fix the problem. We need tariff simplification, but we also need fundamental reform of the market itself, particularly the way the wholesale market works.""And this on its own isn't going to fix the problem. We need tariff simplification, but we also need fundamental reform of the market itself, particularly the way the wholesale market works."
Meanwhile, MPs have urged Mr Cameron to end uncertainty for investors and set clear targets for clean energy in 2030.Meanwhile, MPs have urged Mr Cameron to end uncertainty for investors and set clear targets for clean energy in 2030.
The Environmental Audit Committee says firms will only invest enough in new renewables if the 2030 target is fixed in the forthcoming Energy Bill.The Environmental Audit Committee says firms will only invest enough in new renewables if the 2030 target is fixed in the forthcoming Energy Bill.
But Chancellor George Osborne rejects the target - and BBC News understands he is now being backed by the prime minister.But Chancellor George Osborne rejects the target - and BBC News understands he is now being backed by the prime minister.
The coalition is seeking a compromise to allow the Liberal Democrats to retain pride in their flagship bill.The coalition is seeking a compromise to allow the Liberal Democrats to retain pride in their flagship bill.