Families could end up paying more after a shake-up in energy prices because cheaper deals will be axed, experts have warned.
New Government plans are expected to force companies to offer just four tariffs per fuel and make them automatically shift customers onto the cheapest.
The tariffs would have to include a standard variable rate and a fixed price for a fixed term, then firms would be able to decide on another two.
Suppliers would be forced to offer one price for each of the options, although they could still offer discounts for dual fuel bills or those paying by direct debit.
The move is aimed to address long-standing concerns about soaring gas and electricity prices and fears the current array of tariffs means many people pay too much.
Energy Secretary Ed Davey
A consultation has now been launched and will run until January, with the Government aiming to have all customers on the cheapest deal by summer 2014 at the latest.
Details of the proposal come weeks after Prime Minister David Cameron sparked confusion by vowing in the Commons that firms would be forced to charge customers the lowest price.
Energy Secretary Ed Davey said: “For too long, people have been stuck on the wrong type of energy tariff, paying more than they need to.
“Our new proposals will make things much clearer and easier to understand so that bill payers can get the best deal and feel the benefits in their pockets.”
The Prime Minister added via Twitter: “My promise to ensure energy customers get the lowest tariff is being delivered, despite Labour saying it couldn’t be done.”
It has been suggested the changes could save families hundreds of pounds a year, but industry figures say some may have to pay more.
They warn a simplification would lead to some of the cheapest offers currently available being axed, because firms will be far more limited.
Energy UK chief executive Angela Knight, representing the energy companies, admitted the shake-up would create a simpler system where people could switch provider more easily.
But she also told Sky News: “Some of the choices will reduce because you can’t have a variety of choice, including tariffs that offer you a particularly low rate for a particular time.”
Guy Newey, head of energy and environment at centre-right thinktank Policy Exchange, added: “Cutting the number of tariffs and forcing energy companies to put households on the ‘best’ rate could end cheap deals.
“This risks punishing families who do the right thing and shop around. There is a danger this move could see fewer people switching, reduce competition and therefore push up bills in the long term.”
Corin Taylor, an adviser at the Institute of Directors, claimed the reforms “miss the point” because firms would just increase their lowest tariff to compensate.
He argued: “Instead, the Government should be promoting competition and making it easier for new companies to enter the energy market.”
Mr Davey, speaking to Sky News, admitted he could not “guarantee” lower energy prices because they were dictated by the world gas market.
But he added: “What I can do is the very best for consumers by making sure we have simpler bills, more competition and help people save energy.”
The coalition’s plans follow a spate of price hikes among the UK’s “big six” power firms, who control 99% of the domestic energy supply.
In October, SSE prices rose by 9%, then British Gas and Npower went up by 6% and around 9% respectively this month.
In December, Scottish Power will hike its bills by 7% and EDF by 10.8%. Meanwhile, German-owned E.ON has denied reports it is planning a 11% increase.
The firms all blame rising wholesale prices, which they say are out of their control.
One firm, Co-operative Energy, has bucked the trend by unveiling plans to slash its electricity charges by 2% from December 21.
Shadow energy and climate change secretary Caroline Flint said: “The cheapest deal in an uncompetitive market will still not be a good deal.
“Unless David Cameron stands up to vested interests in the energy market and creates a tough new watchdog with powers to force energy companies to pass on price cuts, his warm words will be cold comfort to people worried about paying their fuel bill this winter.”