Consumers to get a better deal from energy suppliers
The big package of reforms will take time to roll out, so the changes are scheduled to take effect over the course of a about year.
Described as the biggest reform of the energy retail market since competition began, the new regulations are supposed to make the energy market ‘simpler, clearer and fairer’ and will be enforced by Ofgem with the power to levy fines.
The new standards of conduct, launched on 26 August, will require energy companies to deal with customers in ‘fair, honest, transparent, appropriate and professional manner’. They will be expected to communicate on all matters in clear, jargon-free language, particularly when it comes to selling products and drawing up energy bills. Equally, they must make it easy for customers to contact them and promptly rectify any mistakes.
From 22 October 2013, energy suppliers will be banned from increasing prices on fixed term deals, or making other changes to fixed term tariffs, as well as rolling forward fixed term contracts without a customer’s permission.
By the end of the year, suppliers will be required to make it easier for customers to compare the rates offered by energy companies by limiting them to just four ‘core’ tariffs per fuel (gas and electricity). However, all tariffs will have a standing charge and a single unit rate, though some companies are planning to set the standing charge at zero. Dual fuel and online account management discounts will remain.
All customers will receive ‘personalised’ bills come March 2014. This is supposed to show consumers the cheapest tariff rate available to them.
Expenseive ‘dead tariffs’ (those that are no longer marketed), will be outlawed by the end of June 2014. Customers on dead tariffs will be transferred automatically onto the cheapest variable rate.
Commenting on the new standards, Ofgem’s Chief Executive Andrew Wright says:
“Suppliers have already taken some steps to make the energy market simpler for customers and we welcome that, but our package of reforms means they must go further. The standards of conduct we have introduced require suppliers to go through a culture change in the way they treat consumers.
“They have to make sure they are embedding simplicity, clarity and fairness into all their dealings with consumers to tackle the lack of trust that has blighted the market."
In response to Ofgem’s new standards of conduct for energy suppliers, Which? Executive Director Richard Lloyd has questioned the reach of the reforms:
“Improving the way suppliers deal with their customers is a step forward, but Ofgem’s reforms to fix the broken energy market do not go far enough. Rising energy bills are consistently one of the top worries for consumers so the Government must step in to ensure trust in suppliers is rebuilt and prices are kept in check.
“We want the Government to introduce simple pricing and to ring-fence energy supply from generation businesses to increase confidence that there is effective competition in the energy market.”
Angela Knight, Chief Executive of trade association Energy UK, believes the industry has already made laudable steps forward in simplifying the energy market for consumers. She says:
“Energy UK supports the standards of conduct as another step in rebuilding trust in the market. The big issue though is, making sure customers understand their bill so that they can make informed choices and better manage their energy use.
"Energy companies only have control over about a fifth of the customer bill. The remaining 80% is made up of the wholesale price of energy and the costs that others add to the bill such as the wires and the pipes that distribute the energy and the additions because of energy policy.
"Now is the time for the authorities to start an honest debate on what green energy policy means and why bills are going up.”
