Ofgem: Energy tariff reforms should 'simplify' market


Mike O'Connor, Consumer Futures: "The companies will be banned from doing some rather complex, dodgy deals"

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Changes to energy tariffs designed to create a simpler and clearer market are coming into force.

Regulator Ofgem says its banning of confusing and complex tariffs will help to rebuild consumer trust.

Other changes include limiting suppliers to just four tariffs per customer for both electricity and gas, and simplifying how prices are charged.

Energy UK, which represents suppliers, said the changes would "help people get the best deal" on their energy.

Reforms to energy bills

Energy bills generic

From 1 January:

  • Suppliers limited to offering customers a choice of only eight tariffs: Four for gas, four for electricity.
  • Suppliers must inform customers through bills and other forms of communication on what they have done and what changes are planned in a "Treating Customers Fairly" statement.
  • Simpler structure for tariffs: A unit rate and, if suppliers choose, a standing charge.

From 31 March:

  • Suppliers must inform customers of the cheapest available tariff and how much money it could save them.
  • Introduction of a Tariff Comparison Rate (TCR), likened to APR for interest rates, enabling customers to compare tariffs at a glance. The TCR will be measured in pence per kilowatt hour (p/kWh) and based on consumption of an average user.
  • Bills and tariff quotes to include a "Personal Projection", forecasting what a customer will pay based on their own usage or supplier's best estimate.
  • Every tariff will contain a "Tariff Information Label" allowing customers easier understanding and a simpler opportunity to compare it.

Source: Energy UK

The moves are the result of a Retail Market Review which began in 2010. However, there are claims that energy bills remain complex for those trying to find the cheapest deal.

'Restore consumer confidence'

Further reforms will be introduced by April, including forcing suppliers to tell consumers which of their tariffs are the cheapest.

Ofgem chief executive Andrew Wright said the changes would ultimately drive down prices.

"Profits are not an entitlement, they should be earned by companies competing keenly to offer consumers the lowest prices and the best service.

"Now it is up to suppliers to build on our reforms to restore consumer confidence in the energy market."

He added: "There are good signs that they are taking up this challenge."

Ofgem will produce an annual report to consumers on the health of competition in the market.

It has said it "will not hesitate to take further action" if it sees "evidence of further barriers to competition".

Angela Knight, chief executive of Energy UK, which represents more than 80 energy providers and suppliers, said: "If you look at the market now, the deals are fewer in number and much easier to compare.

"Customers will see improvements to the information they get as a result of energy companies bringing in the changes set out in the Retail Market Review.

"This should help people get the best deal."

'Choice and simplicity'

Richard Lloyd, executive director of consumer group Which?, said that the reforms were "a welcome step in the right direction" but added that they did not solve every issue for consumers.

Energy UK's Angela Knight: "We can't be seen to be an industry that is somehow isolated and separate"

"They just do not go far enough to boost competition and help consumers find the cheapest deals," he added.

Meanwhile, Mike O'Connor, chief executive of watchdog Consumer Futures, said: "It would be naive to assume that this will sort out the energy market out once and for all."

But Ofgem's Ian Marlee told the BBC that the changes were designed with customers' views in mind.

"We are responding to what consumers have told us. They want a combination of choice and simplicity," he said.

However, facing accusations that the paperwork surrounding energy bills still remains complicated, he said that the changes made them simpler, rather than simple.

One consideration for customers trying to find the cheapest deal is that some firms will still levy a standing charge while others will not. This charge is designed to pay for the fixed costs of providing energy such as meter reading and maintenance.

The latest reforms follow the introduction in October of new rules for fixed-term tariffs for domestic customers.

Suppliers are no longer allowed to increase prices during the course of a fixed term and must not automatically roll customers on to another fixed-term offer when their current one ends.

Mr Marlee also said that the regulator was planning changes later in the year that would make the market for buying wholesale electricity more transparent. This would make it easier for small, independent suppliers to buy energy to sell on to domestic customers, which would increase competition.

The comments came after Labour's shadow energy secretary, Caroline Flint, claimed the major energy companies "deliberately inflated" the price they paid for electricity from their own power stations.

But Energy UK said that the research was wrong because the figures could not be compared.


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  • rate this

    Comment number 145.

    Ofgem should at least explain why the more obvious and simple regulatory measures are not being pursued, eg

    - no standing charges
    - prices quoted per KwH
    - a stop to the terms "average usage" / "deals"
    - separate generators so we can see their accounts

    Instead of being selective and wishy washy, they need to explain why these particular measures can't be implemented.

  • rate this

    Comment number 144.

    Competition is illusory - the companies supply the same product from the same producers via the same pipes/cables.

    The only variance can be the amount charged for administration and the degree of profit taken, and all these multiple tariffs do is maintain the illusion to the energy companies advantage. We've been sold a pup and boy are we we paying for it.

  • rate this

    Comment number 143.

    'Other changes include limiting suppliers to just four tariffs per customer for both electricity and gas, and simplifying how prices are charged.'

    And that's meant to simplify things is it? Another piece of toothless patronising.

  • rate this

    Comment number 142.

    It's not only the tariffs that need simplifying but the gas conversion from number of meter units into kwh is beyond comprehension! And of course the switching procedure is a joke. I recently switched supplier, Made application on 18 Oct and it took until 25 and 27 Nov to complete. Just why gas and electricity cannot be done together is another ridiculous situation. Who makes these "rules"?

  • rate this

    Comment number 141.

    @ 126.EUCiti2en

    I remember the '70s. 3 day week, power blackouts etc.

    Nothing to do with the utilities being publically owned. Everything to do with power crazed unions holding the country to ransom.

  • rate this

    Comment number 140.

    The energy companies in this country are just con artists backed and encouraged by politicians and the useless Ofgem who are crowing at their success at getting an easier system. What fakes they are, heard them on Today programme this morning and still it is going to be more complicated that necessary. Why? To keep consumers confused.

    Insist on prices as at the petrol station or renationalise.

  • rate this

    Comment number 139.

    I receive my bills on-line, but when I want to print them out, the layout with different heavy colours, 5 or 6 pages of waffle is taking up far too much of my monotone printer cartridge and paper. Other firms and magazines give an option for printer friendly printout, but oh no, not British Gas. As a pensioner I really do have to watch all the pennies.

  • rate this

    Comment number 138.

    They can simplify the bills all they want.

    When you're taking home =

  • rate this

    Comment number 137.

    Those in favour of privatisation and competition seem to want the rest of us to spend our lives working out complex energy bills and changing energy suppliers every month. Their lives may be that sad, but ours are not. Re-nationalise!

  • Comment number 136.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 135.

    Any chance we can apply the same to phone tariffs as well?

  • rate this

    Comment number 134.

    In what has become "rip off Britain?" i will reserve my judgement they are totally untrustworthy.

  • rate this

    Comment number 133.

    I just want an assurance from my supplier that I am on the "cheapest" tarrif possible for me.

    They simply refuse to tell me if I am.

    Suspicious? You bet!

  • rate this

    Comment number 132.

    My last bill said my dd needed increasing to £130 pm. Several emails later they accepted that using their own figures for anticipated consumption the dd should be £100. Quite a difference for a pensioner.
    These attempts to create a cushion by the retail supplier pale into insignificance compared to the ridiculous prices (profits) agreed for wholesale supply by (often) their own parent group(s).

  • rate this

    Comment number 131.

    I understand the comments about pre-payment accounts being the most expensive hitting the poorest but they do cost the most to operate due to more costly elements to the payment process. Online bills and d/d are less expensive to operate and those users are rewarded with discounts. They save money as do the energy companies.

    No one seems to pillory phone companies about pay as you go sim cards

  • rate this

    Comment number 130.

    someone mentioned that we should be able to check our bills.

    Is there anyone here who can check their gas bill?

  • rate this

    Comment number 129.

    Energy companies will just adjust their standing charge to compensate for the 'cheapest' tarrif. It ain't going to work any better. People like me who use very little energy will find bills rising as I will be paying more standing charge, getting charged more before I even switch anything on! I agree with JamesStGeorge, more you use more you pay - much more fair and helpful to lower waged.

  • rate this

    Comment number 128.

    Blah blah blee bloo blah.


  • rate this

    Comment number 127.

    Why do energy companies need to have more than 1 tariff? When you pull into a petrol station do you see different prices listed for business and domestic users? Do you see different prices for small users and large users? Of course not.

    The COST to the producers of electricity and gas is the same regardless of who they are providing it to, so the price should be the same for ALL consumers.

  • rate this

    Comment number 126.

    @113 - yes a cunning plan indeed. Are you like me old enough to remember when ALL critical services were run by the government for the people in the 70's etc - the only problem is I also remember the blackouts, the strikes, the trains never being on time, the moans about the subsidies and the costs and the inefficiencies etc. Must take off my rose tinted yesteryear spectacles.


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