Same energy, different brand. But what's the best price?

gas cost piggy stove©iStock.com/adamico70

CUSTOMERS need to be told who's offering the best energy deals, Ofgem says.

The energy regulator is bringing in rules to make it easier for people to find out the lowest prices.

From September, suppliers will have to inform customers of their cheapest tariff, whichever brand names their energy is sold under.

Ofgem are also trying to encourage more companies to sell energy under their own brand by giving them the flexibility to set their own tariffs - so not only will customers find energy prices clearer, they will find them lower too.

Make it clear

Ofgem has told suppliers who sell their energy on to other companies, also known as "white labels", that they must make it clearer to customers who provides the best prices.

Current arrangements between suppliers and resellers often don't aid price transparency.

For example, not only does British Gas supply the energy that Sainsbury's Energy sells to its customers, it even provides the call centres and sales teams for Sainsbury's.

Yet the tariffs of the two companies are somewhat different. Sainsbury's Energy's cheapest deal saves customers more than £60 a year than the best on offer from British Gas.

It's a similar story with SSE and M&S Energy.

SSE's cheapest deal costs an average of £1,115 a year. But the supplier is under no obligation to tell them they could do better by switching to M&S Energy, paying an average of £1,079 a year.

Yet it's the same energy from the same source. M&S Energy simply re-package and supply SSE's product.

At a glance price checks

When the rules come in, people will be able to see at a glance on their bills and other regular communications from their supplier, if and where they can find a better deal.

From September suppliers will have to include two messages on bills showing people how they can save money, based on their current personal use of energy.

One explains how much they could save if they switched to a similar tariff supplied by their current supplier.

That means they would be comparing costs with the same sort of service, with a similar contract (fixed or variable prices) and the same online or offline account management.

The second message won't compare like with like. Instead it will point out where savings could be made by switching to the supplier's cheapest tariff regardless of the nature of the contract, and regardless of the brand the same energy is being sold under.

Encouraging competition

Not only do Ofgem want to make it simpler for customers to see if there's a better deal to be had, they also want there to be more genuine choice.

So under Ofgem's new rules white labels will have the same flexibility to set prices or offer bundles as the energy supplier. Each will be able to set their own four tariffs, distinct from their partner suppliers.

The intention is to make it easier for new companies to enter the energy market, and for this extra competition to help bring down prices.

Rachel Fletcher, Ofgem senior partner, is an enthusiast of selling energy through white label brands. She says it has "potential" to increase choice and encourage customers to shop around using well-known brands.

But she adds that it's important people have the "complete picture" about all their potential supplier's tariffs.

Understandably some of the existing energy suppliers aren't happy.

They've already been obliged by the authorities to make their pricing less complicated.

British Gas, for example, claimed this new ruling wasn't appropriate because products and services "would not be comparable"; SSE want to keep the existing brand-specific pricing because it "reduces the risk of customer confusion".

The pros and cons of selling on services

Ofgem recognises that white labels bring value to the energy market with genuine benefits for customers.

That's because the differences between them and the companies they buy their energy from aren't purely cosmetic.

As well as lower prices the white label company may provide a prompter reaction to service calls, for example. Or they may promote unique discounts or special offers such as shopping vouchers.

People might feel more reassured when they buy from a name they already know and trust too, like Sainsbury's or M&S.

By catering for the different needs of particular customers, these companies provide people with more choice. If they perform particularly well in a specific area, they may spur the entire industry to do better.

For example, research by Which? in November 2013 on telephone response times revealed British Gas and SSE performed significantly worse than Sainsbury's Energy and M&S Energy. But their performance more than matched them in October 2014.

And yet there are few price advantages in different companies selling the same energy.

Suppliers and secondary companies tend to collude on the price of their tariffs. So M&S and Sainsbury's didn't choose the prices they would charge on a whim. They agreed them together with British Gas and SSE respectively.

That means there just isn't the same pressure to lower prices that an independent supplier might bring.

If the advantage of energy suppliers selling on their services is purely about providing more choice, the drawback is that it also brings more confusion.

Ofgem's ruling won't completely remove that confusion, but come September, customers will be able to tell at a glance - at their fuel bill or the supplier's website - whether they can get the same energy for a better price.

Whether to change company or not is up to them.

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