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 205.

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

    Hardly. The only way to regain consumer trust is a complete renationalisation of ALL the essential utility companies, including rail, before that would happen. Profit and shareholders will ALWAYS come first where privatised companies are concerned. A return to public ownership is imperative.

  • rate this

    Comment number 204.

    If only there was a web site you could go on to compare energy prices......

  • rate this

    Comment number 203.

    What we need is the entire country to significantly reduce it's energy use and start switching to alternative sources.
    ***Unfortunately this will not apply to everyone. As others have said the tariff structures are such that the largest users pay the least per unit and their increase is the lowest so they have less incentive to cut. Low users face bigger increases, as designed, no accident

  • rate this

    Comment number 202.

    I switched to Ovo one year ago because their fixed deal was cheaper than my original supplier. When the deal ended a year later Ovo offered me their new cheapest available deal: Gas had gone up by 13%, Electricity by 22%.

    You get sucked into changing, only to discover a year later that you are practically back where you started.

    Legislation please!

  • rate this

    Comment number 201.

    Why all the calls to nationalise? 3 day working weeks, rolling blackouts, unions, strikes, final salary pensions, overpaid cronies, massive expenses, overpriced bills….real smart move guys. We have one of the cheapest utility markets in Europe, get a darn grip! Switch to a small cheap supplier and get on with your life.

  • rate this

    Comment number 200.

    We don't need simpler bills, we need massive cuts in the bills to bring recent swingeing and unjustifiable price rises back in to line with inflation.

  • rate this

    Comment number 199.

    A damming indictment of the education system if people are unable to do the basis maths required to work out a bill!

    Sensible ideas like increasing the cost per unit the more you use are good but would of course make bills more complicated.

    When bills just came as a charge for use people said it lacked transparency, when they are shown how it's worked out they say they can't understand it!

  • Comment number 198.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 197.

    // ravenmorpheus2k
    The govt and private sector must reduce the cost of living for the average low paid Brit, be that by lower energy bills or other means or raise wages - if they want money to keep flowing.//

    No. Immigrants can manage on low wages, and so should you. If you can't hack it, someone from Romania or Bulgaria will happily swap places with you.

  • rate this

    Comment number 196.

    Hardly helps anyone if they cannot afford energy in the first place.

    A 0 bill is the same regardless

  • rate this

    Comment number 195.

    123. monstymum

    "@116 Bargey - " In fact they can pass you on to another supplier without your agreement.". No, they can't."

    You obviously missed the news item last week reporting that an energy company had transferred hundreds of bad payers to other suppliers without notifying them.

    Yes they CAN transfer you without your agreement to go to that other supplier.

  • rate this

    Comment number 194.

    The government can make all rules they want about our energy suppliers, but it does not address the issue that they are out to get as much money out of us any way they can regardless. Put the utilities back into the public domain again, then things would get better for us. Rich Share holders hold us to ransom in this country, as they own it.

  • rate this

    Comment number 193.

    i am sure these "business men" will find another way of looting our pockets

  • rate this

    Comment number 192.

    1...Compensate 'private' shareholders with undated government stock.
    2...There were no system blackouts when nationalised.
    Want a 'simplified system?...
    3...One background generator & Transmission.
    4...One Energy Source...All types.
    Don't want to lose you tu'penny/ha'penny dividends?
    5...Private Energy companies are making a MUCH better job of it?

  • rate this

    Comment number 191.

    163 michelle, if I don't know something, I look it up. try google for example. It really isn't difficult. The compariosn league table will be interesting, but to find the best deal for yourself, all you need to know is your usage profile, day/night etc, and do the maths

  • rate this

    Comment number 190.

    I think OFGEM should be focussing on holding the Energy Companies to account. We have been trying to switch supply for over 3 months with one of the "main" companies and they seem unable to process the switch. It takes hours to get through to their customer service department only to get someone who is unable to actually do anything.

  • rate this

    Comment number 189.

    Abolish the standing charge. It is a tax on the poor.

  • rate this

    Comment number 188.

    You really, really can't expect a profitable, largely foreign owned cartel to be nice to its British customers. From gas field to turbines through to bills they are in it to extract money with our government's permission and good will. It's going to end in tears - starting with the government.

  • rate this

    Comment number 187.

    Correct me if I am wrong, did the energy companies promise the earth to gain these franchises. They promised lower prices better service & future investment. Seems people can say anything do anything & not be brought to book on there broken promises. To me they broke the contract by lying to gain the business. In the real world you would lose the licence of trade.
    Money talks & public suffer..!..

  • rate this

    Comment number 186.

    These "markets" in natural monopolies are a complete and total joke. Consider all the added costs, OFGEN for a start, then all the duplication at supplier level of 6 or 7 billing and customer service organisations. Waste, waste, waste at every point. Renationalise now and save a fortune. And yes, it was much better and cheaper before privatisation, for those too young to remember.


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