In this article for uSwitch, Andrew Wright, Senior Partner for Markets for Ofgem tells us how it intends to improve the energy market to make it fairer on its customers.
What will energy customers get from a simpler, clearer and fairer market?
For a small number of customers the GB energy market works well. With the help of online price comparison sites, such as uSwitch, they can hunt down the cheapest deals online and save money. But even for these customers, the small print can be confusing, meaning you may not end up on the best deal.
The majority of customers don’t even get this far. A large number of them are put off by too many complex tariffs, poor supplier behaviour and a lack of transparency about alternative offers. The aim of our reforms for the energy retail market is to build the trust and confidence of customers. We want them to engage more effectively in the market so they can hold suppliers to account for their prices and customer service.
We are proposing a set of reforms for a simpler, clearer and fairer market making it far easier for customers to compare offers.
We will make things simpler by restricting suppliers to just four simple core tariffs per fuel (electricity and gas). This will result in a dramatic reduction in the number and complexity of tariffs in the market.Some disengaged customers will be on unattractive ‘dead’ tariffs –that are no longer available to new customers. We will ensure customers on these deals pay a lower price, by banning dead tariffs and requiring suppliers to switch customers on them to their cheapest variable deal if it offers better value.
Making information clearer
We will also ensure that annual statements on consumers’ energy use and what it costs them are clearer and easier to understand, so they act as a yearly prompt for them to think about whether they are on the best deal. Suppliers will also have to use a new Tariff Comparison Rate in their marketing, such as in newspaper adverts, or on switching websites. The rate will show the cost of the deal in a simple pence per kilowatt hour number.We will make it much easier for customers to compare deals, for example, by requiring suppliers to show their cheapest tariffs on bills. Discounts for dual fuel and paperless billing will also be standardised across all tariffs.
Customers deserve fairer treatment from suppliers which is why we are introducing new standards of conduct for suppliers to meet. These standards, like the rest of our reforms, will be backed up with our enforcement powers – meaning we will be able to act against suppliers if they break the rules. This can include fines.
When will the changes be in place?
These are the most radical reforms to the retail market since competition began and we are now in the final stages of putting them in place. The standards of conduct are due to take effect from this summer. The cap on tariff numbers and our other reforms that require changes to companies’ systems are due to take effect from winter 2013-14.
Suppliers tell us that they are serious about wanting to restore customer confidence in the market. Our message is that they should back our reforms now. Only through a simpler, clearer and fairer market will we see more customers switching back on to energy and engaging again, by finding out what the best deal is for them.
More information about the Ofgem reforms can be found here: http://www.ofgem.gov.uk/Media/FactSheets/Documents1/Factsheet%20115%20getting%20the%20best%20deal_WEB.pdf