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
    +3

    Comment number 285.

    267.DWAYNE
    " Industries have stripped maintenance resources back to bone" A recent conversation with a Big6 employee revealed they do the minimum maintenance possible and wait for something to break before its replaced. So much for private "investment"

  • rate this
    0

    Comment number 284.

    @249 DC1990
    Show me the evidence that proves the Tax System is currently used to pay for the infrastructure upgrades please? Or is this you just, as usual, assuming that this is done?
    The biggest problem with this whole debate is just how ill informed people are.

  • rate this
    +1

    Comment number 283.

    We should protest by undertaking a nationwide Switching Campaign

    Every householder switches off there electricity at 09:00 on 1st February for 2 hours, and then at 11:00 switches every appliance they have on full power for 2hrs, and keep doing that for 12 hours.

    The Generating Companies will have one heck of a problem.

    The system is not designed to cope with it.

  • rate this
    +2

    Comment number 282.

    84.JamesStGeorge
    There should be no standing charge

    =>That's to make sure that the more you save the more expensive it becomes as this charge is apportioned over the units you use

    If you used just one unit you'd still have to pay the standing charge plus your one unit.

  • rate this
    +1

    Comment number 281.

    Another institutionalized scam backed up by big government. Prices are more or less the same, so called deals do not actually exist in the long term because these suppliers own the supply chain and recoup those losses elsewhere. Why would shareholders give us free money. Standing charges being the biggest scam of all.

  • rate this
    +3

    Comment number 280.

    Thatchers Gov was lazy & greedy. Yes the nationalised industries weren't working well.
    Rather than privatise everything, and wash their hands of them, the Gov should've done their job properly and just put in better staff.
    Instead we now have privatised industries still being badly run, but the difference is, any profits line individuals pockets rather than going back into a pot for the country

  • rate this
    +1

    Comment number 279.

    Our politicians and civil servants are simply not clever enough to deal with the lorry load of monkeys in control of our energy supply. Whatever they do the suppliers will have another con up their sleeves such as manipulating the levels of monthly direct debits to ensure customers are paying well in advance for their gas and electricity.

  • rate this
    -2

    Comment number 278.

    254.Last Socialist
    "Do I recall 'budgeted proposals' for 'privatization' "

    You probably don't ... but they were there ... it's a requirement of such legal change. Do you want it to change back without the financial implications to be taken into account?

  • rate this
    0

    Comment number 277.

    just explain to me, without mentioning 'bad economic circumstances' (which are self fulfilling) why the price needs to rise?

  • rate this
    +1

    Comment number 276.

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

    I'll believe that when I see it.

  • rate this
    +8

    Comment number 275.

    Has any other country in the world been dumb enough to completely sell off it's infrastructure and make it wholly reliant upon the vagaries of markets and whims of foreign companies?

    We've learnt nothing have we as the latest privatisation merely reaffirms - the Great Royal Mail Giftaway has boosted the coffers of none other then Goldman Sachs who were paid for advice on the launch price!!!

  • rate this
    +6

    Comment number 274.

    They might as well write my Bill in French or Chinese.
    Oh, hang on a minute...!!!!

  • rate this
    +3

    Comment number 273.

    Yet another example of a private company "having" to be regulated by government. So thats banks, water, gas, electicity, trains, telecoms, prisons, the food industry. Good job air is free otherwise there would need to ba another government quango called OFFAIR. Yep you can definately trust capitalists to do the best they can for ALL of the population...............

  • rate this
    +5

    Comment number 272.

    Cameron is SCARED of the energy companies. We need a price freeze. Now please.

  • rate this
    +2

    Comment number 271.

    I don't understand why they didn't get rid of standing charges as well, replacing them by a slightly higher single rate. This would encourage the energy efficient and also reduce the bills of the fuel poor.

  • rate this
    -1

    Comment number 270.

    British Gas and others are using Cameron's gimmick to hammer pensioners and others with new standing charges. Those with low bills are being hammered with unit costs of up to 48p per unit!!
    Abolishing the insulation levy means that rich consumers are benefiting from slashing help to the poor!
    Far better would have been to introduce block tariffs where the more you use the more levy you pay.

  • rate this
    +83

    Comment number 269.

    We need one energy company with one tariff.....that's all....the ultimate simplification. Thatcher's privatisation/competition project has failed, and continues to fail all of us.

  • rate this
    +1

    Comment number 268.

    67.
    totally agree but doing that would mean doing something sensible but as we all know sensible is something this country is unable to do -_- sadly

  • rate this
    +2

    Comment number 267.

    Privatisation is best with no or only small issues with blackouts etc. I'm sure all the home owners who had no power over the whole Christmas holiday period due to a storm would agree with that.... Industries have stripped maintenance resources back to bone and cannot cope with large incidents anymore. Why? To increase or maintain dividend levels for the important people, shareholders. Simples.

  • rate this
    +5

    Comment number 266.

    It is wrong that people on low incomes and the most vulnerable in society suffer the highest price per unit and are most disadvantaged by the direct debit discount scheme.
    A single unit price for all would benefit low users, make the market fully transparent, and more fairly allocate a higher share of the fixed costs (pipes, meters, etc) to the highest users.
    Basic accounting that is fair for all.

 

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