Article by Tony Keeling, Director of Customer Service at SSE
I’ve been writing about something called the Retail Market Review (RMR) – a major reform of the energy retail market in the UK by the regulator, Ofgem. The review aims to make the market simpler, clearer and fairer, but what does it mean for customers?
My last piece looked at the reforms to make things “simpler”. This time, I’m focusing on how Ofgem, together with energy suppliers, is working to make the market “clearer”.
RMR will mean that the range of products on offer is much simpler. However, Ofgem is also changing things to ensure that information about those products is clear and straightforward, so that customers can make better informed decisions.
At a day-to-day, practical level, you should start to see some fairly noticeable changes.
We know that energy bills can appear complicated, and while we’ve improved things by simplifying our bill design, there is still a large amount of information that we are legally required to provide. However, with RMR, Ofgem is bringing in further guidance to help make sure suppliers get this information across clearly and in a way that is easy to understand. This is a positive step.
And it’s also good news for customers that your supplier will now tell you, when they send you a bill, if they can offer you a cheaper deal. That should make it even easier for people to switch to the best tariff for them.
We began that process when we introduced our annual energy reviews last year, but giving customers this information on every bill will help provide additional peace of mind.
Clearer tariff information
As well as helping customers get the best deal with their current supplier, Ofgem is seeking to make it easier to compare products across the market.
Energy suppliers will now provide a Tariff Information Label (TIL). This is a short summary of every tariff and payment method being offered, so it’s clear to customers exactly what they are signing up to. It will also help identify where there are optional extras included with the tariff.
This is a very similar idea to the Key Features document you get with insurance policies and it should also make it easier to choose between two similar tariffs.
But it is still not always as straightforward as it should be to compare one tariff with another, because different suppliers sometimes price their products in different ways. For instance, one supplier might offer a lower standing charge and higher unit rate, or the other way around, and may even vary this ratio between its own tariffs. While choice can be a good thing, it can also make the market tricky to navigate.
What is SSE doing?
For our part, we have a very simple structure of a £100 standing charge per year, per fuel, plus a unit rate, but this can vary from supplier to supplier. So Ofgem is bringing in a uniform Tariff Comparison Rate (TCR), which will be measured in the same way across all products and which every supplier will have to include in all their communications with customers.
This will create a standard metric that gives an idea of which product provides the best value, even if those on offer are structured differently. You’ll have seen something like it before with the Annual Percentage Rate (APR) tool for mortgage comparison.
The TCR is based on customers using an average amount of gas and electricity, so it won’t necessarily show precisely what the cost of a tariff would be for a customer’s particular individual circumstances and usage. However, it will still provide a useful indicative guide to the value offered by different products.
These are all welcome additions to the work we have been doing through our customer forums to simplify our bills and give information to customers in the way they prefer. Although people will have different views about exactly the best way to make prices more comparable, what Ofgem is doing through RMR is a significant step in the right direction.