Energy tariff reforms should 'simplify market', says Ofgem
Watchdog says changes should help rebuild consumer trust
Thursday 02 January 2014
Reforms to energy tariffs should help create a simpler and clearer market and help rebuild consumer trust, regulator Ofgem has said.
Confusing and complex tariffs will be simplified and suppliers will be limited to four core tariffs per customer for both gas and electricity. Discounts to energy tariffs will also be made easier to understand.
Further changes will be introduced from April, when suppliers will have to inform consumers which tariff is cheapest for them.
A Tariff Comparison Rate will also be introduced, which will allow customers to easily compare tariff rates, and bills and quotes will include a "personal projection", which will forecast what a customer will pay based on their usage or a best estimate.
Customers will also be notified of price increases, spelled out in pounds and pence.
Ofgem chief executive Andrew Wright told the BBC he hopes the changes will ultimately drive down prices.
He said: "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.
"There are good signs that they are taking up this challenge."
Mike O'Connor, chief executive of consumer representation organisation Consumer Futures, welcomed the announcement.
He said: "Consumers need a market they can trust and this reform package brings that closer. We have allowed what should be a market for an essentially simple service to become a byword for complexity and confusion and sometimes very dubious practices."
Mr O'Connor said it would be naive to assume the reforms would solve problems in the energy market, and proposed a review to assess whether the structure of the market fails consumers.
He also called for further programmes of energy efficiency to cut consumer bills in the long term, and a simplification of consumer choice and more advice.
Richard Lloyd, executive director of consumer rights organisation Which?, said the reforms were a step in the right direction but did not go far enough to boost competition and help consumers find the cheapest deals.
He said: "This is why the Government should intervene with more radical measures including simpler pricing, greater transparency and scrutiny of the cost of energy policies, and the separation of domestic supply from generation businesses.
"More must be done to keep prices in check and give consumers confidence that the price they pay for their energy is fair."
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