Ofgem: Energy tariff reforms should 'simplify' market


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

Related Stories

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.


More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites


This entry is now closed for comments

Jump to comments pagination
  • rate this

    Comment number 285.

    " 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

    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

    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

    Comment number 282.

    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

    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

    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

    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

    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

    Comment number 277.

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

  • rate this

    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

    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

    Comment number 274.

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

  • rate this

    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

    Comment number 272.

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

  • rate this

    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

    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

    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

    Comment number 268.

    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

    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

    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.


Page 20 of 34


More Business stories


BBC Business Live

    Costa Concordia

    Salvage workers have managed to re-float the wreck of the Costa Concordia cruise ship off the Italian island of Giglio. More than 30 people died when the ship capsized and sank two-and-half years ago. In the largest operation of its kind in maritime history the vessel has been raised just a metre or so off the under-sea platform on which it sat.

    Graphic: F-35

    There's a reason why the defence industry was hoping to show off the F-35 combat jet at the Farnborough Airshow - it's providing lucrative work for 500 companies in the UK. For more have a look at this feature.


    According to the US Attorney General, Eric Holder, "under the terms of this settlement, the bank has admitted to its misdeeds in great detail". He says the settlement "does not absolve Citigroup or its employees from facing any possible criminal charges in the future".


    $7bn (£4.1bn) is a lot of money so where is it going? Well $4bn is a cash payment to the Department of Justice. And $2.5bn will be spent on "consumer relief" which includes investment in affordable homes, reducing the size of household's mortgages and other mortgage relief measures.

    CITIGROUP SETTLEMENT 12:03: Breaking News
    Citigroup Tower, New York

    Citigroup has confirmed that it will pay $7bn to settle an investigation into financial products it sold in the run up to the financial crisis. It was accused of mis-selling products backed by mortgages.


    The UK's second biggest payday lender is to refund over £700,000 of interest and default charges to 6,247 customers who couldn't afford to borrow as much as they were given. US based Dollar owns The Money Shop, Payday UK, Payday Express, and Ladder Loans.

    Prime Minister Cameron

    Prime Minister Cameron has announced £1.1bn ($1.9bn) in extra military spending. Some of that will target new technology and training, including £4m for a centre for "maritime intelligent systems" based in Portsmouth. There will also be a defence apprenticeship scheme to encourage graduates to go into defence engineering.

    AIRBUS ORDER 11:39:
    Airbus A330

    Airbus is celebrating a whopping order from Air Lease Corporation. It has ordered 60 of its A321neo planes and 24 of the larger A330-900 aircraft. Combined the deals are worth $14.1bn (£8.2bn). Air Lease Corporation leases new aircraft to dozens of airlines around the world. Customers include British Airways, KLM and United Airlines.

    WONGA Via Blog Kamal Ahmed BBC Business editor

    "After its regular appearances as the whipping boy for all that is bad in payday lending, Wonga is attempting to offer a new face to customers - and its critics. Part of that will be to clean up Wonga's advertising and Wonga's new chairman Andy Haste told me that the Wonga grandparent puppets will go."

    Farnborough Air Show

    It appears that no Russian officials will be attending the Farnborough Airshow. A statement from the Foreign and Commonwealth Office said: "Due to Russian actions in Ukraine, no representatives from the Russian government have been issued HMG invitations to FIA 2014."

    Wonga football shirt

    The payday lender Wonga has just announced that its new chairman will be Andy Haste - formerly a boss at the insurer RSA. He'll be announcing a shake-up of the business, which has been under fire for its lending practices.


    More on the Farnborough Airshow. Still no sighting of the F-35 fighter jet, the most expensive defence project in US history, which was due to make its UK debut here, after failing to appear in Gloucestershire on Friday. Last week the entire fleet was grounded in the US because of an engine fire.


    A novel in 140 characters? David Mitchell, the author of Cloud Atlas, is publishing his next work on Twitter. It will be released in clusters of 20 tweets at a time, over the next seven days with a total of 280 tweets. He freely admits it's a marketing gimmick but insists that it will also maintain artistic integrity.


    Complaints about energy companies have risen to their highest level, according to data from the Energy Ombudsman. They more than doubled to 22,671 in the first six months of this year compared to the same period in 2013. "The spike in complaints is in part a result of the rising cost of living, but also as a result of consumers becoming more aware of their rights and feeling more empowered to act and fight for a fair deal," said chief energy ombudsman Lewis Shand Smith.

    BROADBAND 10:23:
    Broadband cable

    BT has rejected claims by the Federation of Small Businesses that significant number of businesses are using a dial-up service. It says their data is "wildly inaccurate". BT says that 73% of UK premises can access the fast fibre network and 90% of premises will have access to broadband within two years.

    BRICS SUMMIT 10:15: BBC World News

    No sooner have the footballers left than the politicians arrive. Brazil is hosting a summit for the Brics (Brazil, China, India, South Africa and Russia) in Fortaleza. "Brazil is one of the world's most closed economies," says the BBC's Katy Watson on World Business Report with exports accounting for just 13% of GDP, while other Brics export double that.

    FARNBOROUGH AIRSHOW 10:05: BBC News Channel
    Aaron Heslehurst

    Like a kid in a candy store...the BBC's Aaron Heslehurst is at the Farnborough Airshow and he's louder than the jets. He says the problem for the aerospace industry is that the planes can't be made fast enough. He's also enthusing about new technology that will mean more oxygen in the cabin and therefore less jetlag.

    CHUMMINESS 09:49: World Service

    "Have an awesome week," Lucy Kellaway was told by Simon and Laurie when she ordered a dress from Ebay. Are companies becoming too chummy she wonders on Business Daily. "Chumminess is only acceptable when it feels natural and when it's not too blatantly self-interested," she says.


    US banking giant Citigroup may have to pay an eye-watering $7bn (£4bn) to settle a US government investigation into dodgy financial products backed by mortgages that the bank sold in the run-up to the financial crisis. Reports say that settlement could be announced later today. Last year JP Morgan Chase agreed to pay $13bn to settle similar allegations.

    WOMEN IN INDUSTRY 09:23: Radio 5 live

    Fewer than 4% of people working in the oil and gas industry are women. Radio 5 live speaks to Duncan Abernethy from Banff and Buchan College in Aberdeen. It has a special training course for women. He says four big energy companies sponsor the course, which is proving very popular.

    MANAGEMENT SPEAK 09:18: BBC Radio 4

    "A mobile-first, cloud-first world" in which "nothing is off the table" says Microsoft's new(ish) boss Satya Nadella in a 3,000 word email in which he quotes Nietzche and Rilke. Matthew Gwyther, editor of Management Today told Today "just say what you mean". For more on corporate nonsense read this feature.

    NORTH SEA OIL 09:08: BBC Radio 4

    The BBC's Business Editor Kamal Ahmed has been talking about a review of North Sea oil taxes on Today. He says the industry used to be "like an exclusive nightclub with bouncers on the door only allowing celebrity VIPs access". Now he likens it to "a trattoria touting for business on the pavement outside".

    ADIDAS 09:00:
    Brazuca football

    Adidas is the biggest winner among shares on the Dax index in Frankfurt - up 2%. It had a great weekend, with Germany - one of the teams it sponsors - winning the World Cup. It is also the sponsor of Argentina, the beaten finalists. Adding to the euphoria, Adidas's big rival Nike sponsored Brazil, who had a disastrous World Cup.

    NORTH SEA OIL 08:53: Radio 5 live
    North sea oil rig

    There has been a "significant" reduction in exploration for oil in the North Sea, according to Oonagh Werngren, operations director, of industry body Oil and Gas UK. In 2008 40 exploratory wells were drilled, last year it was just 15, she said on Radio 5 live. She blames higher taxes for making the North Sea less attractive to oil firms.

    MARKET UPDATE 08:45:
    Metal Workers protest, Durban

    Ford says production at its plant in Pretoria, South Africa has been suspended due to a strike by metalworkers. General Motors' plant in Port Elizabeth has also been closed. Labour relations in South African have been deteriorating - the platinum industry was shutdown for months due to a strike by miners.

    BROADBAND 08:27: BBC Breakfast
    Dominic Laurie and a horse

    BBC Breakfast's Dominic Laurie (on the right) is at a stable in Milton Keynes to talk about today's broadband report. RB Equestrian has had problems with its broadband speed, with employees finding it quicker to go home to upload pictures. A telecoms expert from Ovum says businesses should consider using 4G (hi-speed mobile network) because it sometimes works faster than broadband.

    SHIRE TAKEOVER BID 08:19: BBC Radio 4

    Panmure Gordon's pharmaceutical analyst, Savvas Neophytou tells the Today programme he thinks the Shire deal will now go through. His research estimates that the benefit to AbbVie in moving its tax base to the UK (one of the reasons for the deal) is around $350mn and it could be as much as $600m. For the UK it means more jobs, he says.


    Quick check on Shire's shares...they're up 3% this morning after the news that it will recommend the latest takeover offer from US rival AbbVie.

    AIRBUS A330 07:59:
    Rolls-Royce engine

    Airbus has launched the much anticipated A330neo aircraft at the Farnborough Airshow. It's a more fuel efficient version of the plane and will be powered by Rolls-Royce engines. You can keep up with our Farnborough coverage here.

    CHILD LABOUR 07:50: BBC World News

    Samsung Electronics has suspended business ties with Chinese supplier, Dongguan Shinyang Electronics, after it uncovered evidence that suggested it used child labour. China Labor Watch said Shinyang employed children for three to six months during a particularly busy period. On World Business Report, Rico Hizon said the watchdog found at least five workers without contracts.

    Banco Espirito Santo

    The bank that roiled the markets last week - Portugal's Banco Espirito Santo (BES) - has been told to appoint a new chief executive, reports the Financial Times. It seems the Bank of Portugal ordered BES to hold an emergency meeting on Sunday night to name Vitor Bento as the bank's new boss - described by the FT as " a respected economist and company manager".

    WORLD CUP 07:33: BBC Radio 4
    German team, Brazil

    How was it for Brazil? Not on the pitch - but off it. Well, the World Cup wasn't the logistical disaster that many had predicted says the BBC's Katy Watson on Today. But Tom Cannon from Liverpool University says the tournament will leave the country deeper in the red and has not generated much long term economic legacy.


    The board of UK drugs firm Shire is recommending a takeover offer from US rival AbbVie. It follows a revised offer worth £53.20 per share in cash and shares. AbbVie has raised its bid several times. It's an attractive deal for AbbVie as it can potentially dramatically reduce its tax bill.

    Russell Stover

    Never heard of Russell Stover? Well, according to its website, it was founded in 1923 by Clara and Russell Stover in their Denver bungalow. And it is a box of Russell Stover chocolates that leads Forrest Gump to quote his mother: "My mama always said, life was like a box of chocolates, you never know what you're gonna get."

    Man holding Lindt chocolate bar

    The Swiss chocolate company Lindt & Spruengli has confirmed it is buying an American firm Russell Stover Candies. The company says the deal "broadens its brand portfolio in the world's biggest chocolate marketplace" and that it is the "biggest and most important strategic acquisition in the company's history". The purchase price has not been disclosed.

    BROADBAND 06:43: Radio 5 live

    This seems hard to believe - some companies are still using a "dial-up" internet service, according to The Federation of Small Businesses. It says that UK broadband is not fit for purpose. Sue Terpilowski who runs marketing firm ImageLine tells Wake Up to Money her firm has been suffering dial up broadband speeds. Ironically her office is near London's hi-tech hub Silicon Roundabout.

    CHEKHOV'S GUN 06:34: Radio 5 live

    A literary reference baffles presenter Mickey Clarke on Wake Up to Money. Markets guest Brenda Kelly says that "loose monetary policy has been something of a Chekhov's gun". "What's a Chekhov?" asks Mickey.

    A330 plane

    "The A330 is a good rock solid airplane" says John Leahy, chief operating officer at Airbus on World Business Report, but he says it could be more fuel efficient. Leaner burning engines are part of the revamp that is set to be announced for the widebody passenger jet at the Farnborough Airshow this morning.

    EXECUTIVE PAY 06:21:
    Boardroom graphic

    Executive pay has grown from 60 times that of the average worker to almost 180 times since the 1990s, according to the High Pay Centre. The think tank is calling on the government to take action to close the pay gap between company executives and their workers.

    GLAXO CHINA 06:12:
    Glaxo Shanghai

    The Chinese authorities have formally charged a British businessman and his American wife for illegally obtaining and selling private information. Peter Humphrey and Yingzeng Yu were arrested last year in connection with a wider investigation into the British pharmaceutical giant GlaxoSmithKline. The couple, who run a corporate investigation company, were employed by GlaxoSmithKline last year.

    SCOTTISH INDEPENDENCE 06:08: Radio 5 live

    More from Sir Tom Hunter, he tells Wake Up to Money that Scotland's entrepreneurial spirit was "pretty much extinguished" by mining, steel making and ship building. He believes that children need to be encouraged to be entrepreneurial at school.

    SCOTTISH INDEPENDENCE 06:07: Radio 5 live

    Wake Up to Money is in Aberdeen and interviews one of Scotland's richest men, Sir Tom Hunter. He says that politicians are doing voters a "disservice" in the independence debate by providing two completely different answers over what would happen to the pound if Scotland were to leave the union.

    canary wharf

    US prosecutors are offering immunity deals to junior traders in London as part of their investigation into manipulation of the currency markets, according to the lead story in this morning's Financial Times. The report says that junior staff have been offered the deals, in return for information about their superiors.

    06:00: Emily Young, Business Reporter

    Morning all. The World Cup is over but don't worry the Farnborough Air Show has begun. We'll have updates from there throughout the morning.

    06:00: Ben Morris Business Reporter

    Is British broadband a bit feeble? The Federation for Small Business thinks so and that's one of the issues under discussion this morning. Stay with the Business live page. You can emails us at bizlive@bbc.co.uk or tweet @bbcbusiness.



BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.