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Video launched by Ofgem to help consumers get a better deal on their energy bills
Reforms to make the market simpler and fairer came into effect in 2013
Ofgem has today launched a video showing how the recent market reforms can help customers get a better deal on their energy bills.
The video takes the viewer step-by-step through some of the main changes, such as reducing the number of tariffs, which mean it is now simpler for consumers to compare and choose the best tariff for their circumstances. It also explains the new rules on honesty and transparency which suppliers must follow so that they treat their customers fairly.
The next stage of Ofgem’s reforms to the energy market will come into force in April 2014. These will focus on making clearer the information provided by energy suppliers. Bills and annual summaries will improve to provide consumers with the information they need to understand their current tariff and compare it with others available in the market. Consumers will also receive details of the cheapest available tariff if they choose to stay with their current supplier.
Once all the reforms are in place, Ofgem will roll out a wider consumer-focussed campaign which will reinforce the impact of the recent changes and will lead the consumer through the steps they can take to get the best deal for them from the energy market.
Ofgem CEO Andrew Wright said:
“Consumers are already benefiting from our reforms to make the market simpler, clearer and fairer, and this video brings to life just how these changes can help bill payers across Great Britain.
“Switching rates at the end of 2013 were at the highest ever. However, we want all energy customers to understand that it is getting much easier to get a better deal on energy bills. This is important as people who have never switched can save up to £200, just by switching supplier.”
Notes to Editors
1. Ofgem’s retail market reforms for domestic consumers are as follows:
Fairer treatment – introduced in August 2013
Since August new Standards of Conduct require suppliers and any organisation that represents them to ensure that each domestic customer is treated fairly. This means suppliers must behave and carry out any actions with consumers in a fair, honest, transparent, appropriate and professional manner. Suppliers must also make it easy for the consumer to contact them, and make sure that any information (whether in writing or orally) is:
Complete, accurate and not misleading (in terms of the information provided or omitted);
Communicated in plain and intelligible language;
Relates to products or services that are appropriate to the customer to whom it is directed; and
Fair both in terms of its content and in terms of how it is presented (with more important information being given appropriate prominence).
They must also:
Act promptly and courteously to put things right when they make a mistake; and
Ensure that customer service arrangements and processes are complete, thorough, fit for purpose and transparent.
*New consumer protection rules – introduced in October 2013
These rules mean suppliers are banned from increasing prices, or making other changes to fixed-term contracts which are to the disadvantage of a customer. The only exceptions to this are “tracker” tariffs that follow an independent index over which the supplier has no control, or structured price increases set out in advance which are fully in line with consumer protection law. There are also transitional arrangements for certain contracts entered into before 15 July 2013, which will be allowed to see out their duration.
Suppliers will be required to notify customers that their current fixed-term deal is coming to an end between 42 and 49 days before the contract ends.
Between this notification period and the end of the fixed-term contract, suppliers will be banned from charging a termination fee should the customer decide to switch.
Suppliers will be banned from automatically rolling a customer over onto a further fixed term contract.
Instead suppliers will be required to default customers to an evergreen contract if the customer takes no switching action before the end of their fixed-term contract (from 31 March 2014 this default contract must be the cheapest evergreen tariff with the supplier).
All customers on existing, expensive “dead tariffs” (evergreen tariffs that are no longer available to new consumers) must be transferred onto the cheapest evergreen tariff with the supplier by June 2014. A supplier will only be able to keep consumers on “dead tariffs” if they are cheaper than, or as cheap as, the supplier’s lowest evergreen tariff.
Simpler tariffs - introduced end of December 2013
Suppliers are limited to offering up to four “core” tariffs per fuel (electricity and gas) and per meter type. Suppliers are also able to use any fixed-term tariffs in addition to their four core tariffs, in collective switching schemes provided these schemes meet our criteria.
Consumers told us tariffs were too complex and difficult to compare. We have addressed this problem by banning complex multi-tier tariffs, where, for example, consumers are initially charged a higher rate, which only falls if their consumption increases above certain levels. Instead, suppliers must structure their tariffs using only a single unit rate and, if they choose, a standing charge. Some suppliers have tariffs with a zero or low standing charge, and if consumers consider these tariffs better suit their needs, we expect suppliers will keep offering them. (For consumers with multi-rate meters e.g. Economy 7, suppliers will able to offer more than one unit rate)
The complex way in which different discounts have been applied to tariffs has been confusing for consumers, making it harder for them to compare deals. And, in some cases, savings they thought they would make did not always materialise. Ofgem is simplifying this by only allowing suppliers to offer discounts for dual fuel and for managing energy accounts online. These will not be considered as “core tariffs” but as discounts and they will apply uniformly across all tariffs as £/pence per year.
Clearer information - to be introduced from April 2014
New rules will be in place requiring suppliers’ routine communications to consumers to be clear, easy to understand and personalised to them.
Suppliers will be required to give all their customers personalised information on the cheapest tariff they offer for them. This information will appear on each bill and on a range of other routine customer communications.
Suppliers will use a new Tariff Comparison Rate (TCR), in bills and a range of other communications, to provide “at a glance” information to help customers make an initial comparison of tariffs. The TCR will be similar to the APR comparison rate used with credit cards.
Ofgem is also requiring suppliers to provide personalised cost projections for the following 12 months based on the customer’s actual, historic consumption (or, where this is unavailable, the best estimate of their consumption). This will be included on bills and a range of other communications enabling consumers to compare tariffs more accurately.
A new tariff information label will set out the key features of a tariff in a standardised label format. This is designed to help consumers easily compare all the different features of tariffs across suppliers.
Suppliers will be required to provide consumers with an annual summary of their energy usage and costs in a standardised, easy-to-navigate layout. This annual summary will provide consumers all the information they need to confidently assess their options.
Suppliers will be required to give a personalised comparison of old and new prices in a simple pounds and pence form when they inform customers of a price increase.
If suppliers are making any other change to prices, or conditions of a contract which leave the consumer worse off, they must provide a personalised indication of how this affects each consumer.
Consumers will receive a notice before their fixed-term contract comes to an end, informing them of the tariff they will default to should they take no action in the interim.
For further information on these reforms, please see the simpler clearer fairer section of our website
2. About Ofgem
Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority's functions are set out mainly in the Gas Act 1986, the Electricity Act 1989, the Competition Act 1998 and the Utilities Act 2000. In this note, the functions of the Authority under all the relevant Acts are, for simplicity, described as the functions of Ofgem.
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