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Is Ofgem changing its mind about the energy tariff cap?

The new head of the energy regulator has admitted that limiting energy providers to just four plans is not the answer to creating a fairer market

Is Ofgem going to pull the four energy tariff limit?

Is Ofgem going to pull the four energy tariff limit?

Dermot Nolan, the new head of Ofgem, has stated that limiting energy suppliers to four tariffs is not a long term solution to reducing the complexity in the market.

The measure had proved controversial and was criticized by a number of industry analysts and energy companies when first announced. Suppliers argued that they had been forced to remove a number of competitive and popular plans from the market in order to satisfy the four plan criteria.

Four tariffs are not ‘long-run solution’

Speaking at an industry event yesterday, The Telegraph reports that Nolan said: ““I actually think there is a strong logic to having four tariffs, there is almost an element of resetting the market, but what I want to make quite clear is I do not see that as a long-run solution.

“I do not see a restriction of having four tariffs being set by the regulator … in the medium-long term, I really don’t. I do not think it’s the answer.”

He did, however, add that at present the four tariff limit was playing an important role in rebuilding trust in the market.

In-depth investigation underway

The four tariff reform was the brainchild of Alistair Buchanan, Ofgem’s former head. He decided to implement the measure following a three year review into the energy sector. The idea was part of a series of actions taken to create a clearer energy market and avoid confusing consumers with large numbers of energy tariffs.

Back in March, Ofgem announced that it was referring the energy sector to the Competition and Markets Authority (CMA) after deciding the sector was not as competitive as it should be. The results of the in-depth investigation are expected in December 2015.

Nolan has said he will examine the CMA’s report in order to deduce the impact of regulatory interventions on the energy market.

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