Watchdog 'muzzled by fear of energy companies'

Ofgem feared the reaction of the energy companies if it made sweeping reforms to the UK's £25bn-a-year energy sector, internal documents passed to The Independent suggest.

The energy regulator, which will meet today to discuss simplifying gas and electricity bills for 20 million households, has retreated from cracking down on the sales and billing part of licence conditions, which could have led to rogue companies losing their contracts. Instead, Ofgem – which has been repeatedly criticised for failing to stand up for consumers – will ask the companies to abide by a voluntary code of conduct. One of its fears was that companies would "swamp" its staff with queries about the crackdown.

Ofgem decided to reform the energy sector after it launched a wide-ranging investigation last year amid concerns that the big six suppliers were ripping off consumers. Ofgem initially resisted launching the investigation, which found suppliers were overcharging by £500m a year, but later recognised there was widespread confusion among consumers about their bills.

In addition to the code of conduct, Ofgem is expected to force companies to supply the name and price of the tariff in annual statements, with a reminder that consumers can switch to another supplier; present bills in a "clear and prominent" fashion and allow consumers 20 days to switch supplier after being notified of a price rise (though they will still have 65 days before they have to inform consumers of one).

Internal documents obtained by Which? and passed to The Independent show Ofgem considered enshrining the need to provide consumers with clear and accurate information in the licences issued to energy giants. "Initial feedback from the industry roundtable suggested a preference for voluntary principles of some form," one stated.

Ofgem considered making companies charge all units at the same price and limiting the number of tariffs. But in the end it proposed new standards of conduct, stating the energy giants "must not offer products that are unnecessarily complex or confusing".