Policy submission

The Future Default Tariffs Call for Evidence - Which? Response

Which? agrees with the government that consumers should be able to access the benefits of flexibility. Flexible consumption can unlock private benefits for the consumers engaging in flexibility, as well as shared benefits among all consumers. However, making changes to default energy tariffs to support more flexible energy use will impact large numbers of consumers, most of whom have no experience with time-of-use tariffs and some of whom have been on default tariffs for several years without switching. With this in mind, policymakers and suppliers cannot only focus on the end goal of reforming default tariffs but also the transition to that goal
2 min read
Muraad Ali ChaudhrySenior Policy Adviser
Matt GardnerSenior Economist

The shift in understanding and behaviour required is too large to expect consumers to quickly adapt to changes. Consumers will need good information, explanation, communication and protection through the transition. Testing, trialling, monitoring and close supervision of suppliers will be necessary to ensure that the transition to a new model works for consumers. Defaults will play a key role and we appreciate both DESNZ and Ofgem taking steps now to consider options, ahead of the completion of the marketwide half-hourly settlement. 

Key considerations 

1. Transitioning to tariffs which promote flexible smart consumption will require a substantial shift in consumer behaviour. Currently, most consumers are on simple, single-rate default tariffs and have no experience with prices that vary across the day. 

2. Defaulting consumers onto unfamiliar time-of-use (TOU) options without their consent could lead to confusion, higher bills and undermine trust. Therefore, informed consent and active engagement are crucial, empowering consumers to make informed decisions about switching to TOU tariffs through clear communication and educational support. 

3. Linking default tariff options to consumers' existing tariff types and usage could be more suitable than linking to technology ownership. This would reduce the risk of consumer harm from consumers’ being defaulted onto an unfamiliar tariff without the right level of understanding. 

4. Vulnerable consumers require special attention during the transition. The ability to engage with flexibility varies substantially between consumers, with differing levels of financial literacy, digital access, ability to flex consumption and proficiency in managing complex billing structures. Moreover, given the problems that we are seeing with the level of customer service of some energy companies, the regulator must ensure energy companies are putting the right processes in place to support all consumers. This includes additional support and protection measures to ensure vulnerable consumers are not disadvantaged by any shift towards time-of-use defaults. Effective customer service from energy companies will play a pivotal role in providing the necessary assistance and building consumer trust throughout this transition period.

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