Energy firms must warn of cost hike
Monday 28 March 2011
Gas and electricity suppliers have been ordered to give customers 30 days' notice before bringing in price rises as part of a crackdown to force providers to "play it straight with consumers".
Previous rules allowed energy companies to write to customers up to 65 days after increasing prices, but energy watchdog Ofgem confirmed it was bringing in new regulations next month to give households more time to switch their provider before bill hikes.
The changes come as Ofgem leads a widespread shake-up of the industry. It announced a proposed overhaul last week, revealing it had gathered evidence proving that providers were raising bills more quickly than they lowered them when wholesale costs dropped.
Under today's new rules, energy suppliers will also have to give customers 30 days' notice of any change to their contract that will leave customers significantly worse off.
All the "big six" energy providers have brought in price hikes in recent months, blaming the rising cost of gas and oil on the wholesale markets.
Andrew Wright, Ofgem's senior partner for markets, said: "Today's changes will again show that we are serious about making sure suppliers play it straight with consumers.
"We believe that 30 days' advance notification of price increases, coupled with our new proposals for more transparency and an end to complex tariffs, will give consumers more power to make informed switching choices."
The changes, which were first proposed by energy regulator Ofgem in September, will come into force on April 28.
Ofgem last week threatened to refer energy companies to the Competition Commission if they do not simplify prices and sell off between 10% and 20% of their electricity output to allow smaller firms to enter the market.
Several energy companies have already started giving customers more notice since the proposals were put forward last year.
Scottish and Southern Energy, which owns Southern Electric, Swalec and Scottish Hydro Electric, claimed it became the first of the major providers to give customers 30 days' written notice when it announced a hike of 9.4% in gas prices at the end of October.
It said it wrote to its 3.6 million customers straight away before bringing in the price rise at the start of December.
British Gas also claimed to have given its eight million customers 30 days' notice of its 7% gas and electricity price hike from December 10.
But Npower's price rise on January 4 was only announced on December 10 and it sent letters to six million customers in the intervening period.
EDF said it supported the new rules and claimed it gave nearly a month's notice to its 5.5 million customers after announcing 7.5% increase in electricity bills and a 6.5% increase in gas bills on February 3. The price rises were brought in on March 2.
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