Energy industry must ‘learn time of use tariff lessons’

Research conducted by Citizens Advice has found many customers on legacy time of use energy tariffs are unable to save money by using their electricity at off-peak times.

The “False Economy” report finds little improvement from previous research conducted into the experience of customers on tariffs such as economy 7, economy 10 and dynamic teleswitching (DTS).

Citizens Advice has called on regulators and suppliers to “learn the lessons” of legacy time of use tariffs.

The consumer body for energy believes that with new tariffs becoming available because of the smart meter rollout, it is “essential” consumers understand them and are able to “take advantage of the benefits”.

Although time of use customers should be able to pay less by using electricity at off-peak times, the research revealed just under half (49 per cent) of those on such tariffs are actively trying to do so.

Various reasons were cited for this – 39 per cent said it was not practical to use appliances at off-peak times while 28 per cent said it was not practical to heat their home at off-peak times.

The report states customers on legacy time of use (TOU) tariffs receive poor information which can lead to confusion about their tariff.

Only 40 per cent of the people surveyed were confident they knew when their off-peak time was.

“This means that even customers trying to change their behaviour may not benefit,” Citizens Advice said.

The charity suggests Ofgem should work with the Department for Business, Energy and Industrial Strategy (BEIS) to ensure suppliers take a “consistent approach” to meter replacement, especially in relation to the smart meter rollout.

In response to this, a BEIS spokesperson said: “It’s clear suppliers must be fair and consistent in how they communicate with customers and we expect the regulator Ofgem to ensure they do.”

Meanwhile the report has urged suppliers to ensure smart meters will “work effectively” with older heating systems such as storage heaters, before switching customers to smart time of use tariffs.

Victoria MacGregor, director of energy at Citizens Advice, said: “It’s clear from this research that even motivated customers may not get the benefits from time of use tariffs if they don’t get the right information and support. To do this, suppliers need to communicate clearly with their customers in ways they understand.

“If we don’t fix the long-standing problems of these tariffs now, new time of use tariff customers will experience the same frustrations in the future. Suppliers and regulators need to act now to ensure this doesn’t happen.”

Citizens Advice sets out several recommendations in the report including:

• Suppliers should regularly provide customers with clear, accessible and up to date information on peak times and rates.
• Suppliers should set out how they will deliver the outcomes required by Ofgem’s new principles on consumer communications, specifically for legacy time of use customers.
• Ofgem should consider the needs of legacy time of use customers within any future reform of informed choices.

In February, Octopus Energy introduced the “Agile Octopus” time of use tariff which provides customers with half-hourly prices reflecting actual wholesale energy costs.

This includes passing on negative prices to customers through “plunge pricing” when the grid is oversupplied, the supplier said.

Greg Jackson, chief executive of Octopus Energy, told Utility Week: “It’s crazy that the UK faces the prospect of a £40 billion bill to upgrade its wiring, when there’s absolutely no incentive for customers who can do so to use electricity when the system is less congested.

“Electric vehicles (EVs) are critical to cleaning up air pollution (which kills 30,000 people per year) and to combating climate change. Yet many in the energy industry worry that EVs will cause huge infrastructure costs to meet their charging needs – but using energy off peak could dramatically increase our ability to support the clean transport transition.

“So-called ‘legacy TOU tariffs’ don’t cut it.  They create knife-edge price changes, restrict off-peak to inconvenient times and are implemented on clunky technology.”