Finding a better deal on your energy is getting easier
6 Jan 2014 11:41 AM
Energy tariffs are now simpler as Ofgem’s ban on complex tariffs comes into force today
Consumers now have the choice they want and the simplicity they need to get a better deal from the energy market
From April 2014 further reforms will kick-in giving consumers clearer information about their energy
Households who have never switched can save more than £200 per year
It’s getting easier to get a better energy deal as Ofgem’s ban on complex tariffs kicks in.
The changes are part of Ofgem’s reforms for a simpler, clearer, fairer energy market. These reforms are the biggest changes to the retail energy market since competition was introduced in the late 1990s.
Ofgem is banning suppliers from offering complex tariffs, for example where consumers are initially charged a higher rate, which falls the more they use. The reforms also mean that once a consumer has decided how they want to pay for energy they will have just four tariffs to choose from for gas and four for electricity, from each supplier. Together these changes will make it far easier for consumers to compare deals and find the best tariff for them.
From April 2014 a range of reforms are also coming into force to give consumers much clearer information on energy. For example, suppliers will have to tell consumers regularly in writing which of their tariffs is cheapest for them on bills, annual statements and other communications.
Andrew Wright, Ofgem Chief Executive, said: “It is getting easier for consumers to get a better energy deal and by April further help will arrive in the form of much clearer and personalised information.
“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.
“Ofgem will produce an annual report to consumers on the health of competition in the market. We will not hesitate to take further action if we see evidence of further barriers to competition.”
Under Ofgem’s reforms 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 that suppliers will keep offering them.
The ban on complex tariffs follows the introduction in October 2013 of Ofgem’s rules for fixed-term tariffs. These rules ban suppliers from increasing prices on fixed-term tariffs. Suppliers are also banned from automatically rolling householders on to another fixed-term offer when their current one ends.*
And, since the end of August 2013, all suppliers have had to meet new standards of conduct set by Ofgem. These require suppliers to treat all consumers fairly and in an honest, transparent and professional manner. They must make sure that any information given to consumers is clear and easy to understand.
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Notes to Editors
See the simpler clearer fairer section of our website which has all the information consumers need to know about our reforms.
Ofgem’s retail market reforms are as follows:
Fairer treatment – introduced in August 2013
Since August new Standards of Conduct require suppliers and any organisation that represents them, such as brokers or third party intermediaries, 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:
They must also:
*New consumer protection rules – introduced in October 2013
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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.
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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
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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)
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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
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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.
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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.
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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