Ofgem has defended its proposed reforms to the energy market, claiming it will give consumers a better deal, enhance clarity and, ultimately, save people money.
The energy regulator has laid out a series of reforms designed to boost transparency in the market and ensure that consumers have a broader range of options that cater to their needs.
Under the terms of the reform, Ofgem will demand that energy companies offer no more than four core tariffs for each fuel type.
Suppliers will also be required to present clearer bills highlighting the cheapest tariffs and treat consumers more fairly. The punishment for failing to follow these rules will take the form of financial penalties imposed by Ofgem.
Furthermore, it will bring an end to multi-tier tariffs such as those charging the first 1,000 units at a higher rate, while banning price increases during a fixed-term contract, all of which are intended to assist the consumer.
For better or for worse
However, the reforms were recently criticised in a Which? report, that claimed the tariff overhauls could leave some people struggling to identify the best deal for their needs.
In addition, the organisation claims that up to three million people could end up paying more through their energy bills, equivalent to £55 million in total across the UK.
Under the Ofgem reforms, consumers are set to be advised on the best deal available based on medium usage of gas and electricity, but Which? noted that only 26% of consumers use this specific level of energy, with three-quarters of people then at risk of being directed towards the wrong tariff.
However, Ofgem has now spoken out on the matter, claiming that Which? is “misrepresenting the purpose of the tariff comparison rate” and how it fits into the full scope of the reform package.
“The tariff comparison rate acts as a prompt to consumers to take a look at comparative deals,” a spokesman for the regulator stated.
“The tool is similar to the ‘typical APR’ used in financial services marketing, but it is partnered with personalised consumption information necessary to make a full and accurate cross market comparison , which every supplier must provide via bills and annual statements. Ofgem’s reforms will also see suppliers’ cheapest deals on your bill.”
Ofgem reiterated its desire is to create an “at-a-glance tariff comparison” and will be taking forward its proposals to “put the market’s cheapest deal on consumers bills”, even if these are from rival suppliers.
The energy regulator says this should remove the need to compare tariffs altogether – a proposal which has received the backing of the coalition government.
Commenting on the reform proposals, the Department for Energy and Climate Change said the current administration is taking powers to ensure the “vital reforms “are not delayed or frustrated, and will shortly set out government action to bolster what Ofgem is already doing through the long-awaited Energy Bill.
“This includes requiring suppliers to provide personalised estimates of potential savings and a tool to enable consumers to compare tariffs on a like-for-like basis.”
Though Ofgem has come under fire recently – most notably from Labour leader Ed Miliband, who has called for the regulator to be scrapped altogether – it seems that the reform proposals have gained the support of the government, and consumers will soon feel the impact of the changes on their energy bills, for better or for worse.