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

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +2

    Comment number 665.

    663.BLACK_PEARL

    As far as I am aware the 2012 figures are the most up-to-date available from DECC. Please post a link if you believe your information is more up-to-date.

    The point is we pay 5% VAT on energy costs whereas most of EU pay 20% so not only do we pay a higher pre-tax price than the rest of Europe but the tax payer is effectively subsidising the energy companies profits

  • rate this
    +1

    Comment number 664.

    661.Faith Misplaced
    @659: Yes, we know they pay more in Germany etc. That' because they still have manufacturing and thus wealth. And yes, they waste it on some green utopia, but hey, if you have excess, why not invest
    ****
    Yep I believe they are now investing in coal fired power plants
    23 planned last I read.

    Its not CO2 thats going to screw the planet its politics & agenda

  • rate this
    0

    Comment number 663.

    662.SteveHG
    5 Minutes ago
    650.BLACK_PEARL
    What it actually says is

    ""In 2012, average UK domestic electricity prices, including taxes, were the fifth lowest in the EU 15,......,

    ******
    Well I just got my info in a communication with DECC a few weeks ago, so my be more up to date

  • rate this
    +3

    Comment number 662.

    650.BLACK_PEARL
    What it actually says is

    ""In 2012, average UK domestic electricity prices, including taxes, were the fifth lowest in the EU 15,......,

    Prices in the UK excluding taxes were the fourth highest in the EU 15, second highest in the G7, and were 14.3 per cent above the EU 15 and G7 median."
    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/244675/qep551.xls

  • rate this
    +1

    Comment number 661.

    @659: Yes, we know they pay more in Germany etc. That' because they still have manufacturing and thus wealth. And yes, they waste it on some green utopia, but hey, if you have excess, why not invest. Here, we still have the North sea oil & gas. Anyway, we can't afford a green utopia as our loyal leaders decided to bat for the other team and bankrupted our manufacturing and off-shored everything.

  • rate this
    +3

    Comment number 660.

    The Energy companies have to get more money some how after all they pay way over the odds to the generating companies per unit .
    Oh but they own them as well but do not want to disclose how much profit they make on that side.

  • rate this
    0

    Comment number 659.

    Go live in main land Europe & it will be worse, especially German domestic electric prices. Thier public pays dearly towards mega subsidy fueled wind & solar. We're lucky we dont have a crazy green coalition (apart from LibDems) or ours could be far worse

    DECC facts
    "Compared to other countries in the EU-15, the UK has the lowest gas prices and 4th lowest household electricity prices"

  • rate this
    +3

    Comment number 658.

    Oh yeah. That oughta do it. Or maybe you public servants could earn the fat pay & pension schemes and untangle the glaringly obvious collusion they brazenly exhibit by putting their prices up all at once, then not bothering to undercut each other (as you might think capitalism should work) and instead publishing bizarre spaghetti-like figures to confused us. Bring back simple pence/KWhr.

  • rate this
    +3

    Comment number 657.

    what we really need is for all the utilities to be nationalised again..Tthis would reduce
    cost on all of them, also there would be no job losses as the same guys would be needed to run them in public hands

  • rate this
    +3

    Comment number 656.

    Recently changed to Co-op energy.Now had e-mail saying they are not allowed to give me a share of profits as Co-op member because Ofgem is not allowing discounts and that it is not a direct part of Co-op.My mother is with E.on and they told me she can have Tesco clubcard points.They have no connection with Tesco.Is this Ofgem trying to squeeze out smaller competition I wonder?

  • rate this
    +3

    Comment number 655.

    Reality
    After changing suppliers on an annual basis to get the 'best deal' I can honestly say from experience that I have saved s*d all. As you save 2% by switching, prices rise with your new supplier by 18%.
    Basically it's a cartel/monopoly so the customer will always be the victim.

  • rate this
    +1

    Comment number 654.

    646.MarkH2012
    Private individuals simply interested in creating own energy will be seriously looking into and investing in systems that can provide renewable sustainable energy sources For those people willing to make that investment means a huge reduction in energy bills key answer to all of this is investment..
    ***
    You'll never get the return on outlay
    + I object my taxes paying for it

  • rate this
    +2

    Comment number 653.

    An interesting energy thing is :

    Its all about conversion into money.

    Energy is all around & is never destroyed.

    No-body owns it & never will.

  • rate this
    +4

    Comment number 652.

    Hold it folks.We have politicians telling us that a system has to be "Simplified". NHS? Simplified for years. I remember the Electricity Boards, and gas boards, cheap supply locally, with no worries about saving the world, only saving Gran from freezing to death.
    It worked. Perhaps they could try that again?

  • rate this
    +1

    Comment number 651.

    643. Dave1506
    47 MINUTES AGO

    I agree, it wasn't called the golden isle for nothing.

    Yet I have seen nothing done to end that yet.

    But son of mining engineer so no love for Maggie T or Arthur S for that matter

  • rate this
    -2

    Comment number 650.

    269.SillyEnglandDotCom
    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.
    ****
    You'll not like these facts then
    Straight from the DECC
    "Compared to other countries in the EU-15, the UK has the lowest gas prices and 4th lowest household electricity prices"

  • rate this
    0

    Comment number 649.

    If you want decent energy prices seriously look into how you place investment into renewable energy systems then the billing becomes yours You are not at the hands of the energy providers Thats self awareness and not blaming others Interest i call it self interest and seeing how you could help yourselves and possibly others to realise there are other options

  • rate this
    -1

    Comment number 648.

    Finally it doesn’t mean loss of jobs Its means creating jobs in different areas That mean that companies who ever they are should be cross training people irregardless of whether that person / persons decides to stay or leave At some point they will all be beneficial That’s what I mean by Investment if you decent energy prices A listen B Train C The dividends will return Co operation !!

  • rate this
    -2

    Comment number 647.

    Let me repeat this for you one more time Investment ... Education = TRAINING .. Good engineering The basic ingrediants of a good long standing highly competetitve companies who look after thier staff Listens doesent argue takes on board what other people are saying and INVESTS !! Britain has a great deal to learn in particular how to ustilise technology to advantage Not Ignore learn

  • rate this
    +1

    Comment number 646.

    Private individuals simply interested in creating their own energy will be seriously looking into and investing in systems that can provide renewable sustainable energy sources For those people willing to make that investment means a huge reduction in energy bills also this in turn will mean they do not have to rely on major energy suppliers The key answer to all of this is investment

 

Page 1 of 34

 

More Business stories

RSS

Features

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.