Earlier this week Smart Grid Watch noted that it was very difficult for UK power consumers to find specific prices for their electricity.

Today Ofgem (the U.K. regulator of electricity and gas markets) issued a fact sheet on tariff simplification…

According to Ofgem: “Competition was being stifled by a combination of tariff complexity, poor supplier behavior and lack of transparency.” The agency is developing “tariff reform proposals [that] are designed to make it easier for consumers to compare prices and choose a better deal.”

But Ofgem should be careful of what it’s asking for…

Ofgem proposes that U.K. power retailers eliminate most of their rate options. Instead, they would be limited to a single pricing option that includes a monthly standing charge and a flat per kWh charge. This would eliminate discounts and two-tier rates, some of which effectively promote energy conservation and reduced greenhouse gas emissions.

Of course, not all two-tier rates are equally beneficial. Some U.K. retailers offer two-tier rates with a lower price for higher consumption (reflecting the lower cost to provide energy to high-volume customers). This can lead to increased consumption.

In any case, Ofgem’s proposal is a return to fairly heavy-handed regulation. It would strictly limit tariff options related to “evergreen” tariffs which lack defined contract periods.

We suggest that requiring transparency — specifically, clear and easy access to details of electricity prices — will achieve Ofgem’s goal of consumer understanding while still allowing for the market to invent consumer-friendly pricing options.