SUPPLY COMPANIES FAILING CONSUMERS: OFGEM PROPOSES RADICAL OVERHAUL
Ofgem proposes sweeping away complex and unfair pricing practices
Big Six required to auction up to 20 per cent of their electricity generation output
Firms risk facing a Competition Commission referral this year if they frustrate reforms
Investigation launched into Scottish Power’s standard credit prices
Ofgem to appoint independent accountants to improve accounting disclosures
Ofgem to review whether energy companies are frustrating switching in the non-domestic market
Ofgem’s Chairman Lord Mogg said: “Ofgem’s proposals should force open the electricity and gas markets to ensure the market works effectively for consumers. The energy supply companies have eight weeks in which to engage constructively with Ofgem’s proposals.
If firms frustrate reforms they risk ending up at the Competition Commission (CC). This is a holistic package of changes. We will also discuss with Government, if we believe our consumer protection powers need reinforcement.”
Ofgem’s review found that competition is being stifled by a combination of tariff complexity, poor supplier behaviour, and lack of transparency. Further, the degree of influence the big six assert on the retail market has not diminished since Ofgem’s 2008 probe. The clearest example, being the finding that for the first time there is evidence that the Big Six have adjusted prices in response to rising costs more quickly than they reduced them when costs fell.
Chief Executive Alistair Buchanan said: “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 per cent of their generation output. This would increase price transparency and make it easier for new players to enter the retail market.
“Consumers have told us that energy suppliers’ prices are too complicated. It is no surprise that they are bamboozled when tariff complexity has increased from 180 to more than 300 since 2008. That is why we are planning to sweep away this complexity so suppliers’ prices are fully exposed to allow easy price comparisons.
“We are also backing these reforms with a tough approach to enforcement. Consumers must have confidence that energy companies are playing fair at a time when they are being asked to foot the £200 billion bill to pay for the investment Britain needs to ensure secure and sustainable energy supplies.”
Today Ofgem also announced a new investigation into Scottish Power and is exploring whether it needs to bring similar actions in the non domestic market (where the concerns rest on switching being frustrated). This is in addition to an ongoing investigation into British Gas, EDF Energy and npower and into how they handle consumers’ complaints. Finally our investigations into misselling by EDF Energy, npower, Scottish Power, and Scottish and Southern Energy are also continuing.
Another finding of the review is that in general the companies’ response to the 2008 Probe reforms has been disappointingly poor. Ofgem proposes to strengthen the existing reforms and pursue companies with appropriate enforcement action if they fail to implement them.
Further, the company accounting disclosures, required by the Probe, have led Ofgem to call in an independent accountancy firm to examine forensically companies’ returns. Ofgem is also considering whether more needs to be done to help vulnerable consumers in addition to its five proposals. This may involve us liaising with government about additional consumer protection powers.
Full details can be found here
http://www.ofgem.gov.uk/media/pressrel/Documents1/RMRFinal%20Final.pdf
