Ofgem orders “radical” energy reforms

Ofgem has ordered gas and electricity suppliers to simplify the pricing tariffs they offer customers.

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The energy regulator says consumers are “bamboozled” by complex tariffs. It claims the number of tariffs in the market has increased from 180 in 2008 about 300.

Ofgem adds that an increase in transparency about prices will also make it easier for new companies to enter the market.

The watchdog also says the “big six” energy suppliers should auction off up to 20% of the electricity they generate in order to increase competition in the marketplace.

Ofgem has warned the suppliers will be referred to the Competition Commision if they do not comply to the reforms. Energy companies have eight weeks to respond to Ofgem’s proposals.

Ofgem chief executive Alistair Buchanan says: “Energy companies have failed to play it straight with consumers and so Ofgem is proposing to break the stranglehold the big six have over the electricity market by making them auction up to 20% of their generation output.”

Ofgem launched its marketplace review in November after concerns price increases had led to a hike in energy companies’ profits. Some margins had risen by 38%, with the average net profit margin per customer rising from £65 in September to £90 in November.

Ofgem says that companies’ responses to its 2008 probe on unfair pricing have been “disappointingly poor” and it now wants to strengthen its enforcement action if companies fail to implement the new reforms.

Separately, an additional investigation into the difference between Scottish Power’s standard and direct debit prices has also been launched today.

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