Today Ofgem published the results of its review which was instigated after gas and electricity prices soared this winter. We look at how its promises to clamp down on unfair practices in the industry.

Ofgem

For years, many have been complaining that they are unable to understand their energy bills because they are too complicated.

Energy companies have also been accused of making gas and electricity tariffs so complicated that customers cannot easily compare one company’s prices to another’s.

With an estimated 40,000 gas and electricity tariffs currently available on the market it is no wonder that over half of us aren’t sure whether or not we’re on the cheapest one.

Ofgem has agreed that this is unfair on consumers, and have stipulated that tariffs need to be clear to make switching to a cheaper deal easier.

It has also criticised the lack of competition that the ‘Big Six’ energy companies generate with their market dominance, and has accused them of not making enough of the market open for competition.

So if the energy industry heeds Ofgem’s warning, what could that mean for the gas and electricity market?

Everyone is agreed that better competition would be better for the consumer – more choice means incentive to keep prices low.

As well as this, simpler energy bills would inevitably increase the public’s ability to take control of their household bills and has been the focus of a uSwitch campaign, ‘Simpler, Clearer, Easier’, for some time.

In April 2009, uSwitch found that energy bills topped the list of the most confusing household bills available and its subsequent petition for clearer bills received over 8,000 signatures in support.

The Government responded with a letter, confirming that ‘more could be done to empower consumers, and put them in control of their energy costs’.

Although an independent price comparison website will be able to tell you what the cheapest energy supplier is in your area, energy companies should still be required to make this easy to determine from your energy bill. Only one in ten of us is on the cheapest gas and electricity tariff available, which means a lot of households are unnecessarily overpaying on our energy bills.

Hence Ofgem has proposed that energy companies minimise the amount of complex and confusing energy tariffs, many of which only have subtle differences between them.

It is something Ann Robinson, an energy expert for uSwitch said would be a key factor in Ofgem’s review.

However, how this shakeup will take effect is yet to be properly detailed and some key questions remain. For instance, if they reduce the amount of energy tariffs available, what would happen to the customers that have already signed up for the ones that get the chop?

And if energy suppliers are forced to lower prices as well as raise them as wholesale prices change, wouldn’t that mean constantly fluctuating prices and more confusion for customers?

That said, increased transparency is a measure few can disagree with and most will welcome. Profits on gas and electricity are said to have reached £90 per person, so one can only hope this review will herald a more consumer focussed market.

Either way, with millions of the UK in debt to their energy supplier, reforms to make the energy industry fairer and more accountable cannot be swift enough.

Advertisements