Ofgem announces ‘shake-up’ to make retail energy market simpler

The energy regulator Ofgem has unveiled new standards of conduct to make the energy market simpler and fairer for customers.

Its guidelines says that customers have to be told the fairest and cheapest deal available for gas and electricity in a clear and “jargon-free” way. The reform also forces energy companies to offer a maximum of four tariffs for each category of fuel.

The new standards of conduct came into force this week, but suppliers have time until the end of the year to implement the Ofgem’s plan.

Ofgem chief Andrew Wright said, “Suppliers have already taken some steps to make the energy market simpler for customers and we welcome that, but our package of reforms means they must go further. The standards of conduct we have introduced require suppliers to go through a culture change in the way they treat consumers.

“They have to make sure they are embedding simplicity, clarity and fairness into all their dealings with consumers to tackle the lack of trust that has blighted the market. The standards of conduct will also enhance consumer protection as they are backed by Ofgem’s power to levy fines.”

In June, the energy regulator proposed measures to level out the market, in order to allow smaller suppliers to compete with the ‘big six’ energy firms – Centrica, E.ON, SSE, Npower, EDF and Scottish Power – by making them declare the price at which they buy and sell wholesale electricity.

The move came after Ofgem had fined energy firm SSE for £10.5m in April for deceiving its customers about the true costs of its services.

Welcoming the new measures, Angela Knight, chief executive of trade body Energy UK, said, “Energy companies only have control over about a fifth of the customer bill, the remaining 80% is made up of the wholesale price of energy and the costs that others add to the bill such as the wires and the pipes that distribute the energy and the additions because of energy policy.”

Further reading:

‘Big six’ energy firms see 74% increase in profits in three years

MPs say Ofgem is ‘muddying waters’ for consumers over energy firms’ profits

Ofgem calls for level playing fields in energy markets

SSE fined £10.5m by regulators for mis-selling

Gas sector braced for rate-rigging investigation