Ofgem to investigate utilities over ‘penalty clause’ deals

A majority of customers will no longer be able to switch electricity suppliers at no charge, because energy regulator Ofgem is unable to decide whether energy companies can legally hold customers to ransom with fixed-term contracts and penalty clauses.

British Gas and npower have both capped their electricity prices for fixed periods, but the offer includes a &£20 penalty clause, to be activated if the customer decides to move to another supplier before the end of the deal.

British Gas has capped electricity prices until January 2004 and npower has capped dual-fuel prices until January 2003.

Rival electricity suppliers say that fixed-term contracts in the gas and electricity markets are not only anti-competitive but may also mean the two companies are flouting licence rules.

A spokesman for Ofgem says: “We are aware of the situation and are still looking into the details. There are no conclusions at the moment.” Ofgem declines to give any time-frame for a decision to be made on the matter. The spokesman says: “We are still waiting for all the details to be put together.”

Early this year, British Gas announced a gas price hike which was condemned by watchdog Energywatch. In contrast, npower, the second-largest gas supplier in the UK – with 1.7 million gas customers – froze its prices during the winter.

Latest from Marketing Week

Marketoonist on PowerPoint pitches

The Marketoonist

Tom Fishburne is founder of Marketoon Studios. Follow his work at marketoonist.com or on Twitter @tomfishburne See more of the Marketoonist here Tom Fishburne will be speaking at the Festival of Marketing, which is taking place on 4 and 5 October at Tobacco Dock. To find out more information, including how to book tickets, visit […]

PLEASE SIGN IN OR REGISTER. IT'S FREE, QUICK AND EASY!

Access Marketing Week’s wealth of insight, analysis and inspiration that will help you develop as a marketer and leader.

Register and receive the best content from the only title 100% dedicated to serving marketers' needs.

We’ll ask you just a few questions about what you do and where you work, so we can make Marketing Week more relevant to you.

Register now

THE BEST CONTENT

Our award winning editorial team and columnists will ask the biggest questions about the biggest issues on everything from strategy through to execution to help you navigate the fast moving modern marketing landscape.

THE BIGGEST ISSUES

From the opportunities and challenges of emerging technology to the need for greater effectiveness, from the challenge of measurement to building a marketing team fit for the future, we will be your guide.

PERSONAL AND PROFESSIONAL DEVELOPMENT

Information, inspiration and advice from the marketing world and beyond that will help you develop as a marketer and as a leader.

Dedicated to developing your skills and helping you achieve marketing excellence. Find guidance on leadership, professional development and the latest industry jobs.

Having problems?

Contact us on +44 (0)20 7292 3711 or email subscriptions@marketingweek.com

If you are looking for our Jobs site, please click here