Energy sector hits out at automatic switching plans
The energy industry has reacted with dismay to the government’s plans to tackle the so-called “loyalty tax” on energy customers.
Under proposals laid out this morning, the government will trial automatic switching to move customers on expensive default energy tariffs to cheaper deals.
From 2024, consumers on costly tariffs would be automatically switched to cheaper ones on the market unless they decide to opt out.
It is estimated that around 15m households are on default tariffs, meaning they end up spending hundreds of pounds more each year on energy bills.
Business secretary Kwasi Kwarteng said that the plans would ensure households got a “fair deal”.
“Although more of us are now shopping around for the cheapest tariffs, the existence of better deals on the market is not sufficient in itself to drive consumer behaviour”, he said.
“That’s why we will make the switching process even easier so we can tackle the ‘loyalty penalty’ and ensure everyone pays a fair price for powering their homes.
But representatives for the sector said that the government’s plans were “stuck in the past”.
Hayden Wood, chief executive of challenger energy brand Bulb, said: “Bulb’s been calling for the government to take action, but these switching proposals won’t protect the 15m customers currently being ripped off.
“The government urgently needs to act to ban the loyalty tax outright and make energy simpler and fairer.”
He did however welcome proposals to create legislation to extend the existing price cap for energy bills beyond 2023.
Energy UK chief executive Emma Pinchbeck said: “The energy retail sector has changed beyond all recognition in recent years – and will continue to do so at even greater speed for the benefit of customers – and yet this strategy, which should be looking to the future, is stuck in the past.
In the net zero energy system, there will be a different, two-way relationship between suppliers and their customers but the proposals around switching risk undermining that future.
“It’s disappointing and concerning that the Government’s approach to the retail sector threatens to cut across their own decarbonisation strategy.”