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Radical overhaul for gas and electricity suppliers

Radical overhaul for gas and electricity suppliers

Category: Gas and electricity

Updated: 14/12/2012
First Published: 21/03/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Gas & electricity suppliers are failing consumers with their complex and unfair pricing practices, the industry regulator has declared.

Following a review of the energy market, Ofgem said consumers had told them they were 'bamboozled' by the complexity of the tariffs on offer.

"That is why we are planning to sweep away this complexity so suppliers' prices are fully exposed to allow easy price comparisons," added the regulator.

The review also found that competition in the industry is being stifled by a combination of tariff complexity, poor supplier behaviour, and lack of transparency.

It added that the degree of influence the big six energy suppliers assert on the retail market has not diminished since Ofgem's 2008 probe.

The regulator said the clearest example of this influence was that for the first time, the big six have adjusted prices in response to rising costs more quickly than they reduced them when costs fell.

Ofgem said it has launched an investigation into the pricing practices of Scottish Power, adding to the examination already being conducted into British Gas, EDF Energy and npower into how they handle consumers' complaints.

Its investigations into misselling by EDF Energy, npower, Scottish Power, and Scottish and Southern Energy are also continuing.

In order to improve competition in the sector, the regulator proposes that the big six be required to auction up to 20% of the electricity they generate with the aim of increasing price transparency and making it easier for new firms to enter the market.

"We welcome this explicit statement from Ofgem that the energy market is fundamentally failing consumers and that comprehensive and determined action is necessary to set it on the straight and narrow," said Mike O'Connor CBE, chief executive of Consumer Focus.

"Companies are now on a very short leash. If they cannot show the will and capacity to change we would expect Ofgem to refer aspects of the markets to the Competition Commission.

"Consumers have less confidence in energy companies than in any other sector - they feel that prices aren't fair, that tariffs are too complex and that the market doesn't treat them well."

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