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
    +1

    Comment number 325.

    310 Trymachine said...We're all ears ... go for it ... but don't forget the costs
    Thanks...What we should watch for are the forthcoming 'costs' of 'us' losing control our own energy...imports of gas/nuclear from Africa/France....AND energy blackmail?
    Nationalization=Control...our control...if we mess-up then that 'cost' is down to us.
    A risk, yes...courage needed, yes..let's go for it together

  • rate this
    +6

    Comment number 324.

    309. U15588650
    That was almost 30 years ago - can't we move on?. BG privatised in 1986 for GAS. Electricity market reformed in 1998 and this allowed BG to sell electricity too!
    Yes, Major and Tories pushed for 1998, but the point is Labour came in 1997, pushed it through in 1998 then ran it for 12 years to 2010. So why not share the blame for the mess as surely they had time to put it right?

  • rate this
    +8

    Comment number 323.

    312. EUCiti2en
    I think the point trying to be made was that we are paying for upgrades twice, once out of general bill and once with a specific tax/surcharge (such as the £12 National Grid) shown below. Why is a company which made £2.6bil in 2012 requiring a further amount of money from the bill/tax payer? Privatisation was to ensure they picked up the bills, not us.

  • rate this
    +30

    Comment number 322.

    suppliers are getting millions because customers cannot choose exactly when their changeover occurs. Hence customers have to allow their contract to 'expire' and be placed on the basic very expensive tariff then apply for change otherwise they face penalties for leaving early. It then takes at least a month before a changeover date is imposed. This has not been addressed in any way shape or form

  • rate this
    +5

    Comment number 321.

    318.jauntycyclist - ".....apparently its ok for other states to own our energy and extract profit but we can't?"



    Welcome to world of Chicago School/Friendman economics - as first promtoed in the UK by a certain M Thatcher...


    ...it certainly works for the world's global megacoporations....


    .

  • rate this
    +1

    Comment number 320.

    I find it cheaper and easier to switch supplier to the one my local pub has, plus I get a pint while I warm up.

  • rate this
    +4

    Comment number 319.

    The motivation of the energy companies is greed. As long as ordinary and poor people are used as cash cows for executives and shareholders, changes like this, however well intentioned, will not work.

  • rate this
    +1

    Comment number 318.

    given its communists and other foreign governments who own our ultities not sure where this 'free market' is? apparently its ok for other states to own our energy and extract profit but we can't?

  • rate this
    -2

    Comment number 317.

    How many of you are old enough to remember the days of Manweb and Norweb and the like before privatisation? I take it you don't recall the pathetic days of power cuts and almost Edwardian infrastructure? If there has ever been a worse invention than the nationalised behemoths of 40 years ago in regard to energy supply I have yet to see it. Not saying the current companies are great but compared?

  • rate this
    +2

    Comment number 316.

    As an electricity only customer it doesn't affect me but perhaps the same should apply in that you have to be charged by the unit shown on your meter rather than use a formula to work it out, which whilst easy enough to do would ensure conformity amongst suppliers in the long run as it would lower their costs.

  • rate this
    0

    Comment number 315.

    As I have said before, energy policy should be taken out of parliament/politicians control, like interest rates, and put in the hands of a range of related experts.

  • rate this
    +4

    Comment number 314.

    So each company can only have four tariffs and they must tell you the cheapest one,
    Makes you wonder who would buy the other 3.
    Isn’t energy competition wonderful

  • rate this
    +5

    Comment number 313.

    Simplification is a very convenient smokescreen to hide the real issue, namely that we are all being blatantly ripped off by a cartel of suppliers. We need lower prices, and we could start by getting rid of 6 lots of overpaid Boards and greedy, rentier shareholders. Generation and distribution should be State owned for the benefit of all, not for enriching a handful at everybody's expense.

  • rate this
    0

    Comment number 312.

    @302 JasonEssex
    Thank you for proving my point - these are not general taxation but paid for through the bill and contribute to the high cost of the energy bill.

    To get back on track, show me proof that TAXATION is used to fund the upgrades. As for nuclear, the quite silly price agreed by the government for nuclear will be recovered THROUGH THE ENERGY BILL which will again mean a higher bill.

  • rate this
    0

    Comment number 311.

    and do you think it will make it any cheaper theres only 1 way this is going and thats up in price won't be long before the worm turns

  • rate this
    0

    Comment number 310.

    298.Last Socialist
    "You're correct mistakes should be seen and 'new' ideas should meld with the best of the 'old ideas' "

    We're all ears ... go for it ... but don't forget the costs

  • rate this
    +7

    Comment number 309.

    301.EUCiti2en

    British Gas the main supplier was privatized in 1986 under Thatcher not Blair. Thatcher also deregulated the market which led to further sell offs under Major, not Blair. Both Tory and both directly responsible for the cartel which hold us to ransome today.

  • rate this
    -3

    Comment number 308.

    We DO have some of the cheapest energy in Europe:-

    http://www.bbc.co.uk/news/business-25200808

    moan about soemthing else for a change.

  • rate this
    0

    Comment number 307.

    We more tariffs available without a standing charge as like many, in my flat the only appliance that runs on gas is the hob & the only company that offers a no standing charge tariff in my area is Scot Power so where is my choice?

    Regardless of what the unit rate is, it's still cheaper than paying a standing charge as I only use about 7 units of gas p/a so I have no choice but to use Scot Power.

  • rate this
    +2

    Comment number 306.

    The British people really need to wake up and realise that the energy companies have the government over a barrel.
    The Prime Minister as much as he thinks he is charge is NUTS.
    To send a message to the energy firms is very simple, find the energy company that has increased their prices the most then EVERYONE take their business away from them, then let them go BANKRUPT !!!
    Watch prices come down.

 

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