Ofgem bids to ‘restore consumer confidence’ with energy bill reforms

Energy companies are to be banned from offering customers complex tariffs as part of a raft of reforms designed by regulator Ofgem to create a simpler and clearer market for consumers.

Ofgem says the changes will force energy companies to simplify their tariffs so it is easier for customers to find their best deal.

The industry watchdog is rolling out the first batch of reforms, which were first proposed in 2012, this month ahead of further changes in April. It will force suppliers to only offer four tariffs to customers for both gas and electricity alongside simplification of how prices are charged. Further changes will see customers regularly notified on the cheapest energy bills firms offer and the introduction of a Traffic Comparison Rate to make it easier to compare prices.

The country’s big six suppliers including British Gas and E.ON have spent the last two years simplifying their services amid ongoing calls for greater competition from politicians and consumer action groups. Ofgem’s updates aim to accelerate the shift to a more transparent market with the regulator claiming they represent the biggest change to the retail energy market since competition was introduced in the late 1990s.

Andrew Wright, Ofgem chief executive of Ofgem, says it is getting easier for customers to get a better energy deal adding by April further help will arrive in the form of “much clearer and personalised information”. The changes are to be supported by an advertising push to communicate to billpayers how they will be affected.

Wright adds: “The aim of our simpler, clearer, fairer reforms is to ensure competition bears down hard on prices. Profits are not an entitlement, they should be earned by companies competing keenly to offer consumers the lowest prices and the best service.

“Now it is up to suppliers to build on our reforms to restore consumer confidence in the energy market. There are good signs that they are taking up this challenge.”

Angela Knight, chief executive of Energy UK, which represents the energy industry, says: “Energy companies are working hard to make things better for customers are to rebuild trust. If you look at the market now, the deals are fewer in number and much easier to compare.

“Customers will see improvements to the information they get as a result of energy companies bringing in the changes set out in the Retail Market Review (RMR) and this should help people get the best deal for them.”

Ofgem will produce an annual report to customers on the health of competition in the market and warns it will take further action if it sees evidence of “further barriers to completion”. The reforms, set out in the regulator’s RMR, are a riposte to criticisms from MPs that the watchdog is not doing enough to shake-up the dominance of the UK’s biggest suppliers.

Industry observers voiced concerns at the time the changes were first mooted that it could restrict brand-building opportunities due to a “dumbing down of how customers view the energy sector”. A lack of differentiation between tariffs from one supplier to another could hinder customer engagement in bills and discourage switching rather than encourage it, they added.

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