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
    +2

    Comment number 185.

    173.Last Socialist
    " 'Last Socialist'...'establishment'...'boys & girls'...Makes it easier for you to dismiss what I say doesn't it?"

    Do you provide an English translation anywhere?

    Do you have any new ideas to help?

  • rate this
    +3

    Comment number 184.

    This will, in the long term, make no difference at all. Either the government will build a nice little loophole for the industry use or the industry will lobby to get one, or they will find one for the selves because most big business is much smarter that a bunch of corrupt politicians.

  • rate this
    +1

    Comment number 183.

    The only tarriff I want to see is a LOWER one. This quarter I was away for more than a month and my bill on an actual reading is STILL the same as it was due to a rise in rates. So my rates have gone up effectively a third? My pension hasn't gone up at all!

  • rate this
    +1

    Comment number 182.

    ..nationalise energy...etc etc
    ---
    Fine so long as you realise what you're letting yourselves in for. Like 1970s style basic income tax rates in the region of 35% excluding NI, as the taxpayer wld end up funding all investmt/infrastructure.

  • rate this
    +3

    Comment number 181.

    Here's one for you.
    Switched supplier back in October, new supplier came on stream in December, first direct debit taken at end of month.
    In credit to the tune of £350 with old supplier, rang to tell them I'd cancelled direct debit- there's no way I'm paying twice.
    Got an snotty e mail yesterday implying failure to pay my energy bill could affect my credit rating!

    I await my refund.
    Cowboys !

  • rate this
    0

    Comment number 180.

    171. Vampire
    The bills are really not that difficult to understand. If people are too dim to multiply and add a few numbers together, they deserve to pay more. It’s time we stop subsidising stupidity and organising everything around the needs of the village idiot.
    -
    I can lend you a straw if that meets your needs :-)

  • rate this
    +2

    Comment number 179.

    I thought they'd already attempted this, when they brought down tariffs from 30 or so, to 5, but added a standing charge. However, the standing charge penalises the low user. The more people use, the less the standing charge has an effect. Surely that's counter to trying to make people cut down usage.With my previous supllier, the intro of the charge, made it £45 py more for same usage.

  • rate this
    +4

    Comment number 178.

    153.Unbelievable Tekkers
    The government only need to set up their own supplier running at break even or capped 1% profit margin to force other suppliers to react.
    --
    Indeed! I've thought for years that the govt should set up a commercial company to work in competition. I'm surprised Mr Ed hasn't mentioned it instead of his silly price-freezing promise.

  • rate this
    +1

    Comment number 177.

    It is a well-intentioned move but really is just window-dressing as this government and the energy companies have no will whatsoever to make the actual bills any easier for us to live with. It isn't in the interests of either.

    So we still have a cartel operating and the real costs of energy supply (and therefore the actual profits these companies make) remain deliberately hidden from us.

  • rate this
    +2

    Comment number 176.

    We do not want a 'choice of tariffs'. We want the cheapest unit cost for our electricity. It all comes from the same place and the problems only start when the sales people - not the producers- get in on the act.
    Sales companies should compete to sell at the cheapest price and the winner should get the country's business for a set period of time. Anything else is purely manipulation.

  • rate this
    +1

    Comment number 175.

    @114 angry-of-garston "It would be much fairer if the standing charge were factored into the unit price." It was, for a while, but people complained that they 'couldn't understand their bills' and 'it was too complicated', so Ofgem made the energy companies stop doing that...

  • rate this
    +2

    Comment number 174.

    World gas demand goes up so our G&E supply prices go up. Gas demand drops so they have to increase their prices to keep their profit margins. Good game. Losers all round =customers.

  • rate this
    -5

    Comment number 173.

    Fallen into their trap...
    Energy cartel want simpler tariffs so they can 'handle' the price fixing easily.
    Do you really think the establishment 'boys & girls' don't know this.
    Do you like them LAUGHING at you?
    'Last Socialist'...'establishment'...'boys & girls'...Makes it easier for you to dismiss what I say doesn't it?

  • rate this
    +1

    Comment number 172.

    When these companies pay out compensation, it's all the customers of course who pay for it with their bill.

  • rate this
    -17

    Comment number 171.

    The bills are really not that difficult to understand. If people are too dim to multiply and add a few numbers together, they deserve to pay more. It’s time we stop subsidising stupidity and organising everything around the needs of the village idiot.

  • rate this
    +1

    Comment number 170.

    @150 Ian
    Why blame this government for everything? Energy was privatised in 1998 (under Tory legislation), Labour came to power in 1997, staying there until 2010 - that's the first defining 13 year period! On 3 October 2008, Miliband was promoted to become Secretary of State for the newly created Department of Energy and Climate Change - so why did he and his party do nothing to improve things?

  • rate this
    +2

    Comment number 169.

    Whilst they are at it can they sort out their customer service. I recently moved into a house that has a prepay metre. Whilst trying to sort out addresses and getting the prepay removed I never spent less than an hour on hold each time I called.

  • rate this
    +1

    Comment number 168.

    The TCR (Tariff Comparison rate) will be a cracker. I've heard the energy companies are dreading it. Pity we must wait until March to see the league table. It will be interesting to see how the cartel responds to mass defections. The word on the street is that the cartel will converge to an identical rate, but that their tacitly 'agreed' rate will still gouge the consumer for grotesque profits.

  • rate this
    +2

    Comment number 167.

    I just want to see if Supplier A is charging me £10.00 per unit and Supplier B is charging £10.50 I can see quickly that Supplier B is more expensive. I'd like to see a direct correlation between my meter reading and my bill. I also think 'standing charges' should be standardised and capped. Ofgem are faffing at the periphery and need to grow a set and do something for those they represent.

  • rate this
    +2

    Comment number 166.

    #79 I totally agree Bob. All I want to know is how much each electricity company that supplies to my area charges per KWh. Simples. Then I can decide what is best for me.

 

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