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Response to default energy tariffs for households: call for evidence

Photograph of a smart meter in home display on a countertop. A mug and kettle are blurred in the background.
22 April 2024

Smart energy transition puts consumer fairness at risk

In our response to the default energy tariffs for households call for evidence from the government Department for Energy Security and Net Zero (DESNZ), CSE highlights a move to half-hourly electricity pricing could leave many households behind.

The UK government is seeking views on new “default” energy tariffs that would charge households different prices depending on the time of day they use electricity. The proposed change is part of efforts to make Britain’s energy system more flexible and maximise use of renewable energy like wind and solar.

In our full response, we discuss how half hourly pricing could be an important part of encouraging people to use energy more flexibly, a change vital in the transition to a low carbon energy system. But we raise concerns that any shift to time-of-use pricing threatens to exclude large numbers of people, entrenching inequality in the energy market.

When consumers move on to a dynamic time of use tariff, what time they use electricity rather than how much will increasingly determine their energy costs.  This introduces significant complexity and new risks of unfairness.

Future default tariffs

Read the full response.

Price signals to shift demand

Currently, most households pay a flat rate for electricity regardless of when they use it. But as the UK decarbonises its power supply, being able to shift demand to times of high renewable generation will be crucial.

Over the next decade, addressing the intermittency of energy from wind and solar will be vital for reaching net zero. By using energy flexibly and avoiding fossil fuels when renewables power is low, the electricity grid can be low carbon.

The government plans to encourage flexible consumption through new time–of-use tariffs, charging lower prices at times of high renewable output. This could mean running appliances during off peak times such as during the day, for example.

But our response highlights that many households will struggle with the complexity of monitoring and responding to variable energy prices. CSE is calling for better support to ensure a fair energy transition that doesn’t leave people behind.

National awareness campaign needed

CSE recommends a major public information drive to raise awareness of how time-of-use pricing works, and what consumers need to do to benefit from shifting their demand. It’s key that people understand what smart tariffs are, how they operate, and whether they need to change their behaviour to save money.

Our full response also calls for:

While smart tariffs provide opportunities to reduce costs, they also risk excluding people who can’t engage with the added complexity.

Government needs to ensure transparency from energy companies and provide guidance to help consumers – especially those in vulnerable circumstances – navigate this market shift and access the best deals fairly.

Embedding fairness from the start

CSE has been looking at fairness in the emerging landscape of smart energy services like time-of-use tariffs, battery storage and vehicle-to-grid charging for years through our Smart and Fair research programme.

We’ve found confusing product information, lack of data on likely costs and savings for households, and a risk that vulnerable consumers could be left behind or mis-sold inappropriate offers.

As new complexities and costs are introduced, there are real dangers of exclusion that could undermine public confidence in the UK’s transition to net zero.

To embed fairness and public trust, we are calling for government intervention to ensure:

We believe proposals for smart, flexible pricing have potential, but only if adequate support exists to make sure no one is locked out as we create a smarter, low carbon energy system.

CSE’s full consultation response with all recommendations can be read in full below.

Future default tariffs

Read the full response.

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