Sort energy prices or else, says Ofgem

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Gas and electricity watchdog Ofgem has given the "big six" companies a deadline to sort out unfair and confusing price tariffs.

Ofgem's Retail Market Review calls for energy providers to make their complex pricing structures simpler and more consumer-friendly.

Three quarters of consumers stick with the same standard tariff and either choose to stay with their provider out of necessity or an unwillingness to try and find a better deal elsewhere. The regulator says it is increasingly concerned about the growing number of 'sticky' customers.

Only 5-10% of customers are believed to be 'pro-active', switching providers or tariffs, according to Ofgem analysis. A further 5-10% will change but only in response to speaking with a sales agent.

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A study from the Office of Fair Trading shows complex pricing is more prevalent in energy retail than any other sector, with 61% of customers claiming it is difficult to choose a supplier.

This is mostly because the market is deemed too confusing and complicated. It is difficult to calculate how much the contract will cost and hard to compare suppliers' terminology, which sounds different but describes the same things.

Ofgem wants to see a limit of one standard tariff per payment method (prepay, direct debit and named bills) rather than the current unnecessary number - which has increased by 70% since 2008.

"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," says Ofgem's chief executive Alistair Buchanan.

The regulator is also calling for a standardised measure of pricing, so that consumers can compare costs between providers more easily.

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Its proposals have been welcomed by consumer campaigners; Ann Robinson, director of consumer policy at uSwitch calls the overhaul "long overdue." She adds: "What Ofgem has acknowledged today is that the market isn't working properly for consumers."

Gas and electricity suppliers now have eight weeks to co-operate with Ofgem and show they are engaged with these changes. Failure to do so will result in providers facing a Competition Commission referral, Ofgem warns.

In response, Energy UK, the contact point for all energy providers, says energy companies will work closely with Ofgem to ensure the market is working effectively for consumers. Though it argues that Britain has one of the most competitive energy markets in the world.

Christine McGourty, director of Energy UK, says: "Energy companies will continue to do everything possible to serve their customers well, and keep prices as low as possible. Companies will now be looking at Ofgem's proposed reforms in detail and respond to the consultation fully in due course."

She adds: "In response to customer demand, there is now a wide range of energy products available - such as green tariffs and fixed tariffs - to meet the diverse needs of different customers. If energy companies are not setting out these options clearly enough then this is something that should be addressed."


Your Comments

I wish there was more that Ofgem could do to help us poorer people of the UK. This price hike and all future price hikes are dangerous to scociety, we are in the middle of a crash and we are pushed to our very limits with paying for things this is just another piece of straw that will eventually break the camels back. I myself am supporting both me and my partner and all these rises are killing me, I soon will have to sell up and move back home if these rises in this sector and others continue. I would also like to add that although £743 million was claimed as BG's profits and they still have the cheek to say that energy prices has risen and they have to pass these costs on.....Really? The more these rises continue, the worse off UK as a whole will be, apart from the people who actually get paid lots of money!!!
I have tried to get hold of an energy smart reader for my home to try and help myself but the webpage said we'll contact you when we are ready to complete - Charming, how many "well off" people out there are getting this too???
On the point of making things easier for people to understand, technology nowaday could do this for us, BG should collate information together and make it available as an upload, then we could automatically download to U Switch or other such providers, then it will calculate this best tariff's available for us and give us an option.
I am also one of the named "sticky" customers, I stay with BG on a standard tariff because I don't understand how to work out how to get the best tariff or put in all the KW info to see what provider is best, I stick because once 1 leads the rest follow. I need help and the least BG could do is be proactive and offer the best Tariff to their customers to keep them spending money with them, but why would they do that, that wouldn't make them £743 million PROFIT a year....

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