Promise of cheaper fuel bills ‘in seconds’

By Jane Bradley
Published on 02/12/2011 12:32

OFGEM has unveiled proposals for a simpler, more competitive energy market which it claims will allow the majority of customers to work out their cheapest deal within seconds.

The regulator’s plans include a “no frills” tariff with a single standing charge set by Ofgem and a simple unit price. Alongside these will be more innovative tariffs with protection against price rises for the duration of the deal.

It also wants companies to improve customer information including bills, annual statements and price increase notifications and plans to break the power the Big Six energy suppliers in the electricity market to encourage new entrants.

There has been a growing backlash against energy companies in recent months as all of the Big Six providers, including ScottishPower and SSE, raised prices amid soaring profits for the firms. The companies have blamed spiralling wholesale prices for the increase.

There are more than 400 different tariffs currently available, which have left consumers confused as to how to get the best deal.

Ofgem’s study of more than 2,000 people found that 85 per cent of consumers could identify the cheapest deal in less than half a minute when the standing charge is set by Ofgem, leaving just a single unit rate to compare. This compares with fewer than half being able to select the cheapest tariff under the current arrangements.

Ofgem said that more than 70 per cent of those tested said they would be more likely to switch if tariffs were made simpler, suggesting that competition in the market could be stepped up. Scottish Gas owner British Gas, E.on, EDF and SSE have recently unveiled plans to simplify their tariffs and the others recently pledged to improve things for their customers.

“Encouragingly, we are seeing that major energy companies like British Gas, E.on and SSE are recognising the problems that Ofgem has identified and there is a growing sense of consensus forming behind the need for a simpler, more competitive energy market,” said Ofgem’s chief executive Alistair Buchanan.

“Ofgem is calling on all suppliers to back reform, which gives energy suppliers a chance to draw a line under the past and an opportunity to restore consumer trust.”

The regulator said its aim was to increase transparency of energy companies’ profits and their wholesale energy costs so that consumers and potential entrants are able to understand how retail prices relate to wholesale costs.

Ofgem has appointed independent accountants to look at the financial information companies provide, including profits and how they report wholesale energy costs, and will report back on their findings in the new year.

Richard Lloyd, executive director at Which?, said: “Ofgem’s proposals are a step towards a better energy market. Clearer information on bills and tougher enforcement of rules should bring some much- needed fairness and transparency to this market.

“Energy suppliers should act now to make these changes without waiting for the regulator to force them.

“But this alone will not reverse the collapse of consumer trust in the energy system.”

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