Ministers today fleshed out plans to make energy giants charge customers the lowest suitable tariff - amid warnings that the cheapest deals could be scrapped.
Energy Secretary Ed Davey was announcing proposed legislation to force companies to cut the number of gas and electricity tariffs that they offer to four per fuel, as well as a separate dual fuel option.
Households would choose from the four tariffs - which would include fixed or variable rates and two other which could be green energy or Economy 7.
With hundreds of over-priced “legacy” tariffs being banned, the Government argues that consumers would automatically be put on the lowest charge for their chosen tariff - as there would only be one.
They would still also choose their payment method, direct debit, cheque or cash, and could still switch companies for a better deal.
Millions of people will benefit from lower bills, ministers argue, as currently only 15 per cent of households change energy supplier each year.
But energy experts warned that the sweeping reforms could lead to the axing of the cheapest deals and prices going up for customers who have shopped around for the lowest tariffs.
Energy UK chief executive Angela Knight, representing the energy companies, said there was a “risk” that the shake-up could mean the end of some cheap deals.
“What it will do is potentially remove some choice away from people and certainly some deals that people get at the moment,” she told BBC Radio 4’s Today programme.
She also suggested that overall bills could continue rising if the cost of gas goes up.
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Audrey Gallacher, director of energy at Consumer Focus, added: “The worry is that right now some of the cheapest deals in the market are only picked up by a few consumers.
“There’s a danger that those cheap deals will go and everybody else will find themselves on a tariff at the higher range of the current tariff mix.”
David Cameron appeared to catch Mr Daveyand his officials by surprise by announcing in the Commons last month that energy companies would be forced to charge the lowest tariff to their customers.
The Energy Secretary was today unveiling in the Commons details of a consultation on energy bills, including simplifying them, and help for vulnerable customers.
His statement will be studied closely for any variation from Mr Cameron’s commitment.
The move comes amid public fury at energy giants increasing their profits and hiking bills.
Shadow energy secretary Caroline Flint said: “The cheapest deal in an uncompetitive market will still not be a good deal.”
British Gas has increased bills by six percent for millions of households as its pre-tax profits from domestic customers is set to rise six per cent in 2012 to around £575 million.
SSE, which trades as Southern Electric, Swalec, Atlantic and Scottish Hydro and serves households in London, recently unveiled half-year profits spiralling by 38 per cent - just a month after hitting customers with a nine per cent hike in bills.
